Thursday, October 21, 2010

The Keynesian Theory Dies in its Birthplace

Britain, birthplace of the Keynesian monster that destroyed the West, has sent a Knight in Shining Armor to slay the beast.

I wish them luck.

Those backing this agenda will no doubt be attacked and skewered by their political foes because in the short to medium term this will be very, very hard on a great number of people.  I have compared it to a fat, slovenly, overindulged American teenager being conscripted into the military and facing a brutal readjustment in basic training.  Of course, on the other side that teenager will be lean, healthy, and vibrant - but its hard to see that place from their current position on the couch with the TV and video games blocking the view.

The fact of the matter is that in America, the U.K., and most of the West, the proportion of people working in the private sector to people working in the public sector has fallen to its lowest levels in decades... and in some countries, in all of history.  Combine this with outrageous pension and healthcare "benefits" (forced extractions from the have-not-private-sector to the haves-public-sector) and viola! You find yourself here, trying to avert a Greek style meltdown because there is no one big enough to bail out the U.S., or even the U.K.

So without further ado:

Dear American Left:

Its over.  We have reached the terminal point. The U.S. will, absolutely and positively, eventually bite the very same bullet that the U.K. has bitten.  The damage you folks caused - the destruction of the American family, the addiction of MILLIONS upon MILLIONS to social programs that will de facto be defaulted on, an addiction that fueled our growth in prison population, HIV, violent crime, etc.. - with your misplaced vision of social engineering will go down in history as one of the greatest historical failures since the Third Reich.

Dear American Right:

Its over. We have reached the terminal point. The U.S. will, absolutely and positively, eventually bite the very same bullet that the U.K. has bitten. The damage caused by increasing the size of our military until we had occupational forces across the globe, interfering in the internal politics of sovereign nations, playing world cop, and antagonizing the more radical of these folks to the point that they were willing to kill themselves in order to kill us, etc... - with your misplaced vision of American exceptionalism which will go down in history as one of the greatest failures since the U.S.S.R.

Keynesianism is DEAD, may it rot in hell. Now, let us kill the Federal Reserve Act, Obama Care, the Department of Energy, the Department of Commerce, the Department of Homeland Security... privatize Social Security, Medicare, Fannie Mae, Freddie Mac... and end the bailout of the "the too big to fail" (the establishment)....

The U.S. federal government will need to cut 37% of its budget at a minimum (just to bring government into equilibrium with revenues) and likely should be double that (just to bring government into equilibrium with humanity).

The Tea Party says they want to Do The Right Thing.... well, here's your shot.  Don't miss.

44 comments:

Stephen B. said...

That was a pretty clever, dual way to frame it Greg.

Anyhow, if the Tea Party misses their shot, another, probably more radical group will arise.

What do I mean by "more radical" - ?

I'm not sure yet, but we'll know it when we see it.

That said, I don't think that the Tea Party is strong enough for the task.

Donal Lang said...

You have blamed the Left for social programs and the Right for military/oil adventures, but didn't mention the Gambling Banks once in that post. I agree, the L and R didn't help any, but it was the smartass bankers, corrupt and spineless credit rating agencies and something-for-nothing 'professional investors' who creating the trillions of Ponzi debt which is collapsing the fiat money system (and its barely started yet!)

Yes, the UK is cutting spending with the aim of a balanced budget in 5 years time, but that relies on forecasted tax income - personally I doubt they'll achieve the 19% reduction in Public Sector budget that they hope for (30% in some Departments).

Of course, in a country where 4 in every 10 jobs is Public sector dependant (and in some areas its nearer 9 out of 10) there's going to be some pain and anger.

In reality the cuts only take us back to the real Gov't spending levels of 11 years ago, so its not THAT painful - i don't recall thousands homeless or starving in the streets in 1999!

bureaucrat said...

1) It's kind of hard to swallow that there just isn't money available for a basic safety net of government benefits when there is no shortage of money amongst and for the upper class -- at least in the US. I know the Tea Party wants everyone to think we are all getting poorer equally, but that is crap. There is LOTS of taxable money available -- the corporate income tax and individual income tax for the wealthy has decreased as a percent of tax collections for 20 years. Lots of rich people are screwing us while patting us on the back.

2) People get disabled and fall apart long before they die. You can set the retirement age to 80 if you want. You will end up with sick, non-productive people sitting at their work stations. We are not going to live to age 200 -- never. Social Security and Medicare need small changes to fix most of their problems.

3) 90% of economists and economic teachers believe in pump-priming Keynesianism. Krugman, Stiglitz, Obama's entire bunch of ecnomic advisors .. I myself have less and less confidence in Keynesianism, but what you are asserting is that thousands of economic and very smart PhDs have gone all this time being wrong and were too stupid to admit it?

Greg T. Jeffers said...

Folks:

Its just math. Its not politics, its math.

In the end, this is what it will be - you can take it to the bank. Who does what and who takes credit for it? Now THAT is a whole other story.

stay tuned.

Anonymous said...

Donal,

You didn't mention the bought and paid for gov't bureaucrats that aided and abetted the banks every step of the way. The US government actually co-opted the ratings agencies and changed the way they did business in order to hide the shenanigans. Somewhere in the mess in the US I'm quite sure there was a promise that the fat cats would be made whole if everyone just kept his mouth shut.

The whole idea that bundles of what the mortgage industry called "liar's loans" got excellent bond ratings and were sold without suspicion is ludicrous. EVERYONE knew what was going on. The foreclosure scandal, and the NY Fed and the pension funds suing BoA are the first cracks in the dam. Now that investigations have started, they will be forced to work their way back from foreclosure fraud to underwriting fraud. The rats have broken ranks. There is no honor among thieves. It is a fine day! The top three layers of management at the big banks, the Department of the Treasury and the Federal Reserve should all go to jail.

Regards,

Coal Guy

Anonymous said...

Just out of curiosity, what happens if Mr. Invisible Hand is not able to provide even minimum food, shelter and clothing for 20% of the population? And the other 80% won't help them? What do you think will happen? They'll just go quietly off and die?

Greg T. Jeffers said...

Dear anon:

register or use a nickname. No anonymous comments here. If you have anything to say, rather than asking rhetorical questions - have it at.

I do not moderate comments nor censure anything except folks that do not add anything to an intelligent conversation. Your comments seem disdainful.

What are you trying to say?

Greg T. Jeffers said...

Oh and as an answer:

If there is not enough food, air, water, whatever - nature will make the decision.

Anonymous said...

Interesting post as always. My question is about what other jobs are left but government jobs once all the "real" jobs have been moved off shore? Seems to me that the proportion of government jobs has to increase or else most of the US would be un-employed.

Anonymous said...

Anon,

People are resourceful. They will find productive things to do, at the urgent command of their stomachs. There is HUGE motivation in that. You don't give the common man enough credit.

Regards,

Coal Guy

Greg T. Jeffers said...

Anon:

Loathing the system and natural law does not make you enlightened - not even a little bit.

Employment, especially in the public sector is EASY to fix - cut everyone's (total) compensation by 65%, and you will be able to both balance the budget AND cut unemployment to ZERO.

This will then motivate folks to other things to make a living that are more palatable.

Anonymous said...

Loathing the system?? Touchy touchy. I wasn't defending government jobs simply asking what these people would otherwise do. The transition you are proposing would make for some interesting social dynamics. I may under rate people but am always open to pleasant surprises.

Anonymous said...

Does the 65% pay cut include military and police? They would seem to qualify as public employees.

A diff anon

Greg T. Jeffers said...

Of course it would. If Government is misguided enough to maintain this may folks on the payroll my example is likely the most economically efficient method.

A better idea would be to cut government - ESPECIALLY law enforcement and regulatory budgets - to FORCE government to perform appropriate cost/benefit calculations...

Caveat emptor and Laize faire will do wonders when people take the hit for their own stupid decisions.

Life is NOT fair. We don't need, don't want, and cannot afford a "make-life-fair" police.

Greg T. Jeffers said...

The political bloodbath that will come about here as a result of what is going to happen one way or another is the reason why NO ONE is willing to touch this with a 10 foot pole - it is not survivable politically.

Funny, the same guys that are not willing to risk their job are only too willing to risk the lives of military personnel "for the good of the country".

Greg T. Jeffers said...

BTW anon:

I loathe the system AND consider myself enlightened.

Bill said...

Bur,

'There should be enough money'...

We are currently $13T in debt with over $100T in unfunded liabilities. With this amount of debt how are we to have money for anything.

We must get out of debt before we start deciding what we have money for. <0 is <0 all the time no matter what we 'should' have.

PioneerPreppy said...

You should add the community reinvestment act to your list. That was the main enabler of the housing loan disaster.

I don't think the real right is all that in favor of military spending at least not in the way it is done today. I am afraid what we have had masquerading as the right for several years is more RINO than anything else.

There are of course a number of big business entities gaming the system. Google and GE come to mind right off and they should be dealt with but first and foremost we need to trim government waaaaaay way back. Once that ball starts rolling and these cut government employees know what they have lost public opinion will really take a turn towards cutting the rest of the fat but we gotta break the public service unions.

Either way the US is headed towards a pie serving reduction for someone and I am closely watching to see who gets shorted.

Greg T. Jeffers said...

Pioneer:

No argument here...

It was the RINO's that f&^%ed things up for us more so than the G-d forsaken Dems...

But sometimes a name change and a fresh start is in order... or something like that.

Yes, government must scaled "waaayyyy back" as you say... but we need also to quantify what and how much "waaayyy back" is, because it really is going to be unbelievable painful.... and in order to make that pain as fair and even as possible we will absolutely, positively HAVE TO break the public service unions. There will be no room for their hand in the till nor their influence on the hill(s).

Yea, maybe I should have added the community MALinvestment act... I really want to emphasize that which the Tea Party has danced around - the cuts are going to have to be MASSIVE, they are really going to hurt, and we have got to find a way for all of us to participate in and share the sacrifice - almost like we were on war footing.

Greg T. Jeffers said...

pioneer cont....

though we are a two party system with proper opposition, what is coming will require cooperation not seen since December of 1941...

Th Left and the RINO's MUST surrender, the libertarians need to seize the political apparatus of the Republican party and the Dems simply must get a grip on economics and human nature...

My bet is that this will NOT come to pass, and that we will go thru several "vote the bums out" Tea Parties, Coffee Parties, Frapachino Parties, mostly de-caf parties, whatever parties... and in the end it will be the international bond market that forces the issue.

But we CAN hope. And b*tch, and complain...

Greg T. Jeffers said...

Bill:

Don't worry about unfunded liabilities... we have no intention, and no means, of paying them... we will pull a de facto default... but not on the Treasury debt - that would be suicide for the Republic.

Long Live the Republic!

bureaucrat said...

Bill, there is lots of money out there amongst the top 20% of income earners and the superrich. I'm one of them (the upper 20%), and I have quite a bit of surplus after I pay the necessaries. I'm sure you are all aware that corporate income taxation in the U.S. has nearly fallen to zero because of all the tax breaks American corps get. Not to mention the tax breaks for the rich: in Illinois, both U.S. Senate candidate Gianoulias and governor candidate Bill Brady are millionaires who paid ZERO Federal income tax last year.

The federal debt is actually $13.67 trillion today, but that really doesn't say anything. Tax the rich ... you're gonna have to anyway. You get a lot for your Federal taxes. Would you rather live in Africa?

PioneerPreppy said...

Greg
I hope you're right in the end and it is justa stream of political fights but I am just not sure. You are right about the repubs and I believe so many tea party supporters are really just libertarians at heart that perhaps that faction will grow.

The most important welfare at the moment is unemployment if that stops we could see some serious issues. Yet general welfare and food stamps are running a close second.

Until we know where the cutting knife is going to finally fall we cannot predict what will come. So it is still a watch and wait game.

Cheers

Greg T. Jeffers said...

Bur:

I cannot debate economics with you... you simply don't grasp it.

bureaucrat said...

Jeffers,

Your day will come, and your farm will indeed be a good place to be.

But my posts are just a reminder that it can take a LOOOONNNNGGGG time for many economic/financial problems to gestate.

You still haven't agreed that the world isn't even close to coming to an end -- the grocery stores and gas stations are full, we are awash in everything due to overproduction earlier this decade, government debt continues to be bought by pretty much everyone, natural gas just hit a low at $3/million BTUs, and on and on ...

I was storing non-perishable food in my basement in 2007 thinking shortages were just around the corner. If anyone is learning anything from this blog, it is that it takes a LONG time for some of these themes to make you any money, or save your .. butt. Think of the fools buying oil at $147 in 2008 hoping to make a killing.

When I have facts wrong, let me know. I dare you. I dare your barnyard animals too. :)

PioneerPreppy said...

Ya know Bur the gas stations were full in France a week ago. The next day they weren't.

It can happen damned fast me thinks.

Greg T. Jeffers said...

Bur:

Wasn't talking about gasoline supplies... I was talking about the impact of cash confiscation of the rich - otherwise known as taxes...

See, we have this economy here... and the economy has no idea who you or I am/are. None. It only knows numbers. If the government takes 1 dime in taxes in excess of what the economy can support - and by mathematical necessity that will come from the "rich" - then the economy will develop anemia. If you take $1 Trillion too much, the economy would not even make it the end of the quarter...

What you are reading is propaganda.

bureaucrat said...

Jeffers,

Hopefully you are teaching your kids and your animals the following common sense truths ..

1) The American (and European)people are hugely supportive of their government programs (the top 5 at least) that they THINK they hate so much. The U.S, is a socialist country already, considering all we spend on medical care, pensions and transpotation. And socialism costs.

2) These programs cost lots of money

3) You can borrow for those programs for awhile, but not forever.

4) No point trying to get blood out of turnip and trying to tax people that have no money.

5) So what is left: tax people more who have money.

6) The rich start crying they don't have any more money, and promptly jump in their BMWs for tennis "at the club" before going to Charlie Trotters restaurant and dropping $900 for dinner for 3 (I actually paid that one year).

So, we can continue this delusion, and blame oil and everything else, but that is the truth of it. Popular programs require money, and if the stupid Chinese don't want to buy any more bonds, someone has to pay for it.

Ask the pigs. I'll bet they understand. Pigs are smart. :)

bureaucrat said...

Pioneer,

An excellent point, and this country also does not have a lot of surplus oil products ready to replace a cutoff for more than a month. But I think you will agree that there isn't anyone holding up the oil products in THIS country ... yet. :)

bureaucrat said...

The rich are doing just fine ...

http://timiacono.com/
index.php/2010/10/22/
good-news-the-rich-
are-doing-better/

PioneerPreppy said...

Bur

Nope there isn't any group holding up transportation in the US. Still who says they won't? Just like in France there is plenty until there isn't.

As for your tax the rich idea I am sure they have money but having it and the government being able to get to it before other matters cause issues like those in France are two very different things. Even if the rich have enough extra to not kill the economy when taken there is no way they are going to hand it over and they can put up enough of a fight that it really won't be worth while. Thats why the government always goes after the little guys first.

Crybaby said...

To the Tea Party:
Its over before it began. Because there is no tea party. They are Republicans in drag. Who are they kidding? It was over the minute
O'Donnell declared that she is not a witch. She would have done better admitting that she is a witch. Because all witches aren't old and ugly. Some witches are young and beautiful. And then there are the bitchy witches who can't even be elected Governor of a state after spending $140 million because she is so obnoxious.
Most people in this country are afraid of single party control. If there are four or five tea partiers in Washington they won't be able to accomplish anything because Obama will veto anything they propose.And it will guarantee that Obama gets reelected because people are afraid of anything too radical and afraid of the Republicans controlling the Presidency and the WHite HOuse.

So, tea partiers: party on spending your masters' money. The party will soon be over.

Dan said...

I think Bur is right for once; Crude is going to go down a bit, at least for a while.

Dextred1 said...

Crybaby,

I ask this sincerly, did you go to the huffington post and use their printouts to light up a fatty and make youself that F**king stupid? You are a Rambling Wreck, try to make some damn sense next time. Thanks

Dan said...

The Tea party started out as a reform movement but then the GOP started worrying about them, after first ridiculing them. the establishment has somewhat embraced and sought to lead them. Now they are looking like a sad joke with pinhead palin as their leader and we have the GOP and the Tea Party in an unloving embrace as they seek to either reform or use each other. The problem I see is that change is badly needed and one way or another we will get it. By diluting the Tea, the establishment has only ensured that another more radical group will emerge. Eventually we will get a group radical enough that establishmentarians will not touch it; moreover it will be the only game in town aside from the known shafting at the hands of TPTB, so it will get support. “Those who make peaceful revolution impossible will make violent revolution inevitable.”- John F. Kennedy

Neither the NSDAP nor the Bolsheviks were very popular, they were simply the only viable alternative to the untenable status quo. Perhaps Winston Churchill best explained sentiment behind their rise when he stated. “If Hitler invaded hell I would make at least a favorable reference to the devil in the House of Commons.” The enemy of my enemy and all that…

Dextred1 said...

I see the tea party taking us back to a much more fiscally concerned republican party. I tend to be socially conservative, but like most conservative people I understand that without economic freedom you can have no political freedom.

No third party has a chance, but a re-energized republican party is needed. The tea party saved the republican party from a slow death. Can they change everything by themselves? Of course not, but they can start a debate.

Why is everyone so dramatic now, I think we need to be honest enough to understand that expectations and reality are not usually aligned. just look at Obama!!!!!

Dan said...

So there was some ebb and flow prior to the 1850s but now our two party system has been perfected and set in stone, never to be changed again?

Independents are 36% of the electorate, over a third! Also note the rise in the UK, it seems to be a broad based shift in attitudes a hard shift in the zeitgeist if you will. These things seem to arrive at 80 year intervals all over the western world- along with depressions and world wars. The general patter is world depression followed by world war followed by massive political change going back to at least the American Revolutionary War (1775–1783)/ East Indies Campaign (1778–1783)/ Antilles War (1781-1782)/ Fourth Anglo–Dutch War (1780–1784)…

PioneerPreppy said...

The tea party won before this election campaigning even began. Its early momentum took Ol' lake diving Teddies seat for repubs even if he wasn't a tea partier himself. It caused the first split in that New York race which showed how many RINOs were in the ranks and unwilling to lose gracefully and it pulled together enough previously divided factions to get some serious notice.

How many RINOs lost in the primaries? How many began seriously changing their stances? How many people now know what dishonest crooks unions and organizations like ACORN, SEIU, etc are who didn't have a clue before?

For years ACORN has set up a voter registration table in a local shopping mall. This year those same progressive idiots are afraid to be seen canvassing for votes. Even under a different name.

Whether it goes the way of the dodo or not the Tea Party has motivated, unified and educated enough people that it has already won the first battle and that was to organize some real political resistance to the progressive special interest, Affirmative action, welfare alliance, feminist hacks.

People who just rolled over and gave in now have a backbone because of the Tea Party and that is just a start.

Dan said...

The Tea Party’s original mission was to effect change not start a conversation, the only person I know of that is just trying to get attention on an issue is Jimmy McMillan. However, I suppose the Tea Party has accomplished more than I am giving them credit for.

Dextred1 said...

The tug of war between the conservatives and the rinos is as old as the party. This is just a time when the conservatives have regained control of the party and it will culminate in a conservative president if not in 2012 then 2016. The country is ripe for real change. This wing has been zzzzzzz for a while. The liberal republicans (good libs and first libs, small government, etc) were the first to do this little dance in the 1870's. Then the mugwamps took a turn electing Grover Cleveland a democrat who might be a perfect example of what we need today. Probbally the most fiscally conservative president ever. Everything got all progressive for a while, then came the new deal and the republicans were destroyed only getting like 25 senate seats. It was not until Barry Goldwater in 1964 did the conservatives get back in the game. Then a another 20 yr hiatus till Reagan. We are bound for a real conservative sometime. Hopefull 2012 :) Please God!!!!!!

PP, Thumbs ups

Greg T. Jeffers said...

The "social conservatives" that spent like Democrats were worse than Democrats - we NEED an opposition party, after all.

Bur:

The price of oil is not really an indicator of anything right now other than where we are in the inflation/deflation tug of war.... the supply is a whole different story.

On finances and the economy... you are the perfect example of the government bureaucrat.

bureaucrat said...

Truth hurts. :)

Dextred1 said...
This comment has been removed by the author.
Dextred1 said...

Jeffers,

I am a social conservative. Social conservative usually denotes an individual that stands for traditional morals believing that individuals and government should encourage the promotion of these. I reject that you can enforce Christian morals on non-Christians though. This libertarian streak is as old as the church. The New Testament church did not try to change society, but individuals. In some places like Central America the Catholic Church is wholly in bed with the socialist/Marxist left.

Encouraging families and morals has been the foundation of every just society in the history of mankind though. Institutions like marriage cannot be underestimated in the decline of civilizations. Most of the spending had almost nothing to do with any of this stuff though (promotion of traditional families, abortion, opposition of eugenics and human enhancement, euthanasia, etc). Most of the people in my church reject the government’s involvement in areas outside the constitutional bounds. But it is not the right, but the left that does not allow states to outlaw or encourage practices in their indivual states. The idea of federalism takes most of these issues and makes them local, where they should be. You don't like weed, cool pass a law in Nebraska outlawing it. You want gay marriage in California cool; don't bring it to Missouri though.

We would never want state control of our church, which would mean they would be censoring something. Anyways most Christians view their relationship as personal and as such reject the idea that the state can encourage "salvation".

Now maybe you are talking about the Euro version of social conservatives that use the state for welfare. But that is much different that the American social conservative movement.