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Thread: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

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    Default Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    It appears that 2013 may present the 'acid test' for Keynesians versus Autrians .... from


    (snip)"“Those who cannot remember the past, are condemned to repeat it.” George Santayana

    Ideology is powerful, capable of masking unpleasant facts. Whether we recognize it or not, we are all slaves to ideology.

    Economists are no different in that regard than other people. They hold preconceived ideas which affect the interpretation of data and facts. In the extreme, ideology is capable of blocking the recognition of contradictory information, effectively blinding a person to valuable evidence.

    Keynesian economists believe, regardless of logic and data, that economies can be managed from the top down. In their world, economies are little different than machines. Change some inputs here, speed them up over there, add some lubrication, etc. and the machine will respond in the fashion desired. Output can be “managed” to whatever level needed purely by adjusting the parts of the machine.

    Austrian economists on the other hand do not see a machine. They see millions of individuals all making decisions to improve their own lives. The price system provides the coordination among these separate pieces, performing a function no human, supercomputer or government could ever accomplish. For Austrians, economics is a bottom up approach. To effect change, you must change the incentives and disincentives that individual decision makers are afforded.

    The following graphic, which I have highlighted before, provides a wonderful comparison between the two approaches:





    No matter how good someone in Washington believes his grand plan is, it comes down to how individuals perceive it. While this graphic refers to ObamaCare, it could just as easily refer to any other grandiose (or not so grandiose) scheme dreamed up by central planners. Quite simply, if government were to offer constructive ideas and options, there would be no need for coercion and violence on its part to force people into behavior they are uninterested in.

    Likewise, if government would leave the economy alone rather than continue to intervene to prevent necessary corrections, the economy would recover rather quickly and return to its normal growth path. But that is not what activist government does and it is the reason why this Great Recession drags on and on. In 2004, before the Great Recession hit, two economists discussed the Great Depression and why it lasted so long. Not surprisingly, they concluded that government had made matters worse:


    Two UCLA economists say they have figured out why the Great Depression dragged on for almost 15 years, and they blame a suspect previously thought to be beyond reproach: President Franklin D. Roosevelt.

    After scrutinizing Roosevelt’s record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years.

    “Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump,” said Ohanian, vice chair of UCLA’s Department of Economics. “We found that a relapse isn’t likely unless lawmakers gum up a recovery with ill-conceived stimulus policies.”



    These findings would not surprise anyone of the Austrian persuasion. Nor would they register with anyone of the Keynesian persuasion which includes most Washington policy makers. As a result these (and many other findings with similar conclusions) were ignored by policymakers and we are repeating the mistakes of the Great Depression.

    The reasons we are still in this deep recession are the same ones that accounted for the Great Depression lasting as long. If we continue on the same intervention/stimulus path, economic conditions will only deteriorate from here. Japan has been in their economic malaise for more than two decades. The US cannot last that long before falling into what history will call The Greater Decession.

    Aside to John Maynard Keynes: Your series of short-run “solutions” is killing the long run. When we finally succumb to Depression it will be with a much more dysfunctional and hollowed out economy than the one you experienced in the 1930s."(snip)

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    with further commentary from the Daily Capitalist ... from


    (snip)"The Year That Was 2012

    By Jeff Harding, on December 29th, 2012


    As readers of the Daily Capitalist know I, as a purveyor of unconventional economic wisdom, have a different take on … well, (almost) everything. I have some thoughts on the year 2012, a retrospective if you will of the really important economic issues in 2012. I and others here have written extensively about these issues this year. There are tons of issues I’ve not mentioned, but these are the big ones that stand out. Please bear with me.

    1. The Recovery That Never Came

    This is probably the real top economic story of 2012 because it led to a number of policies and events (below). Despite massive public spending (Keynesian fiscal stimulus) and unprecedented money “printing” by the Fed (monetary stimulus or QE), the economy stagnates and unemployment remains high.

    One may wish to ask why these Keynesian/Monetarist nostrums have failed their task. I have a quick answer and that is they have never worked to revive any economy from a depression, ever. Our GDP has been in the doldrums all year, except for a recent blip which was entirely a figment of new money, not any underlying real, organic growth. There is nothing out there that will revive our stagnating economy in the near future.

    2. QE 2.5, QE3, and QE4 (Money Printing)

    The Fed has been pumping massive amount of “money” into the “economy.” The fancy word for it is quantitative easing, but it is no different than had they just printed more banknotes and distributed them to their cronies. If you look at the measure of this, the Fed’s balance sheet, it is at historic highs. Since November, 2008 the Fed has “printed” about $2 trillion of “money” created out of thin air. Now they have announced what is, in essence, QE Infinity. That is they intend to print more money until they see unemployment come down. Again, one may wish to ask why the five preceding QE’s failed to achieve the Fed’s goals, and since they failed, why do we need more? The quick answer here is that we don’t need more, it doesn’t work, and it destroys real wealth which leads to further stagnation. If printing money was the key to wealth and prosperity, then why is there so much poverty in the world?

    3. Worldwide Economic Decline

    While we are fixed on the events in Greece it should be noted that the entire world is in economic decline, and that includes China. While juggernaut China is growing, their growth has declined substantially since 2010 (from 11.9% in Q1 2010 to 7.4% in Q3 2012). China merely reflects the status of their major trading partners, the U.S. and the EU. The EU countries have been slowing as well and for some time. Yes, this includes Germany. Is this a coincidence? Well it could be that world’s economies are tied together in trade, but the main reason is that almost all of these countries follow the same unsuccessful economic policies that we here in the USA practice. The depressing thing is that all I hear is that world leaders promise more of the same failed policies. The outlook for positive growth, assuming they keep spending, racking up debt, and printing money, is not good."(snip)

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    God, I love you, Melonie. As a student of Austrian economics, I find that most people bought into Keynesian ideals and never stopped to understand how flawed they are. The smarter students of economics oftentimes go to monetarism-- I've dated investors and had to explain Austrian economics to them, often with shock and awe.
    Fact is, unbacked money has intrinsically no value unless you give it value. A dollar to me is different than a dollar to anyone else, hence why central planning is flawed. As a polisci and bio student in college, I noticed that the same concepts used in biological populations applied to economic models... and upon a little research, I found that economics' basic equations come directly from biology's biometric studies. Why? Because just like an environment with tons of variables, various species fighting for resources, and limitations on resources, an economy has tons of variables, various groups fighting for resources, and limitations on resources. You can't plan and create an environment perfectly, nor can you predict the exact effects of various actions taken on an environment, yet our government (and others) have thought with a great amount of hubris that you can predict exactly the effects of law on money and even create economies.
    When I see any politician make economic promises, I laugh. People need to understand that although money can be created, there is only so much current and potential value in ANY economy, based on the working population and available resources. Inflation is DEVALUATION of each dollar, not creation of value. Even Forbes agrees.
    http://www.forbes.com/sites/johntamn...he-adolescent/
    I know others might drink the Kool-Aid and buy whatever stats government and big business throw at us to keep us appeased, but as is well-known, stats can be manipulated... and it's nearly impossible to have statistics that are free from one's bias. (For the dissenters, take a quantitative application class and see how many opportunities one has to make interpretation of data skewed.)

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    ^^^Very interesting Bunny, I'm going to take a slightly different tact and state that I though Melonie's post in this thread was the biggest piece of garbage I've ever seen in Dollar Den. I found it to be almost complete conjecture and wildly inaccurate conjecture at that.

    Just for starters, the claim that "Despite massive public spending (Keynesian fiscal stimulus) and unprecedented money “printing” by the Fed (monetary stimulus or QE), the economy stagnates and unemployment remains high." is truly laughable. The facts are that the DOW has almost doubled, around 7 million jobs have been created, big business that was close to bankruptcy is now sitting on almost $2.5 Trillion, unemployment is below 8%, housing is having a big surge and the US has recovered better than all but 2 countries in the world.

    As far as the silly cartoon she posted- it completely ignores the fact that Obama is proposing mainly not to raise taxes, but to just put them back to where they originally where when we had one of our greatest eras of prosperity in the 90's. Even with that, he is only proposing putting returning them back to those levels for the wealthier taxpayers who can afford to absorb the increase. It also ignores the fact that Obamacare isn't proposing changes to a functioning healthcare system, it is proposing changes to a completely dysfunctional system that is getting more and more unsustainable and creating more of a drag on our economy each year.

    As per your comments on Austrian vs Keynesian argument, the Austrian theory has many weak-points and doesn't fully hold up under scrutiny. I won't say that all Keynesian theory is correct or that it works all the time- but it cannot be denied that under certain circumstances spending by the government will stimulate the economy. Further, great benefit can be achieved as long as the spending is under the right circumstances in the right manner and then curtailed when/if the economy is able to stand on it's own. Even better if once the economy is stronger, measures are taken to pay back the debt that previously accumulated- as we did in the late 90's/

    As for your thesis that you can't predict exactly how things are going to go, that is certainly true- however, I would argue that you can many times predict what is likely to happen there are probabilities and previous results to help determine a course of action. In addition there are also situations like we experienced with the financial crash where you have a decision between the somewhat known results of what would happen if you did a large bailout and the almost completely unknown results of what would happen if you let everything fail.

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    All I will add is that, theoreticals aside, 2013 should provide a huge amount of real world evidence regarding Keynesianism versus Austrianism ... via Brazil, China, Japan, the EuroZone, and the USA.


    And for Bunny's benefit I'll share William Banzai's 2013 New Years parody ...


    (snip)"PARTY LIKE ITS 1929

    The Asshole Formerly Known as Printz


    I was dreamin' when I wrote this

    Forgive me if it goes astray

    But when I woke up this mornin'

    Coulda sworn it was Fiscal Cliff judgment day

    The S&P was purple and the Reuters screen was gray,

    There was busted Bankstas runnin' everywhere

    Tryin' to run from the destruction,

    U know I didn't even care

    CHORUS

    say say

    Dow headed down to zero

    Wall Street Ponzi party over, oops out of time

    So tonight I'm gonna party like it's 1929



    I was dreamin' when I wrote this

    So sue me if I go to fast

    But Wall Street life is just a Ponzi, and Ponzi weren't meant to last

    QE profits all around us, my trading mind says prepare for flight

    So if we gotta die lets go and hang Bernank and Geithner tonight...



    say say

    Dow headed down to zero--

    Wall Street Ponzi party over, oops out of time

    So tonight I'm gonna party like it's 1929



    Lemme tell ya somethin'

    If U didn't come to party,

    don't bother knockin' on the money Printz's door

    Ink's leaking holes in his pockets,

    and baby he's ready to roll some dough

    Yeah, everybody's got an unhedged bomb,

    we could all blow any day

    But before we let that happen,

    We'll dance our Keynesian lives away



    Oh, they say say Wall Street Ponzi party over,

    oops out of time

    So tonight I'm gonna party like it's 1929



    say say DOW headed down to zero ponzi party over,

    oops out of time

    So tonight I'm gonna party like it's 1929

    we gonna, oww 1929

    Dont ya wanna go 1929

    Dont ya wanna go 1929

    Dont ya wanna go 1929"(snip)


    Last edited by Melonie; 12-31-2012 at 06:46 AM.

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    ^^^Hahaha Melonie- we'll add that to your hit list of previous predictions:

    $5 gas guarantee by the end of the year
    $200 barrel of oil
    DOW down to 4,000
    Food riots in the US
    Egyptian riots spreading worldwide

    There are a bunch more. Why do you insist on doing this?- almost nothing of what you post is factual, it's right-wing speculation/propoganda that almost never comes to pass. You've hijacked this section into a blog for you to distribute your highly biased (usually incorrect) personal views. This is not the format for that. Why don't you start your own blog or see if they will let you have your own section on Stripper Web?. Does this section even have a moderator?

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    Quote Originally Posted by jimboe7373 View Post
    ^^^Very interesting Bunny, I'm going to take a slightly different tact and state that I though Melonie's post in this thread was the biggest piece of garbage I've ever seen in Dollar Den. I found it to be almost complete conjecture and wildly inaccurate conjecture at that.

    Just for starters, the claim that "Despite massive public spending (Keynesian fiscal stimulus) and unprecedented money “printing” by the Fed (monetary stimulus or QE), the economy stagnates and unemployment remains high." is truly laughable. The facts are that the DOW has almost doubled, around 7 million jobs have been created, big business that was close to bankruptcy is now sitting on almost $2.5 Trillion, unemployment is below 8%, housing is having a big surge and the US has recovered better than all but 2 countries in the world.

    As far as the silly cartoon she posted- it completely ignores the fact that Obama is proposing mainly not to raise taxes, but to just put them back to where they originally where when we had one of our greatest eras of prosperity in the 90's. Even with that, he is only proposing putting returning them back to those levels for the wealthier taxpayers who can afford to absorb the increase. It also ignores the fact that Obamacare isn't proposing changes to a functioning healthcare system, it is proposing changes to a completely dysfunctional system that is getting more and more unsustainable and creating more of a drag on our economy each year.

    As per your comments on Austrian vs Keynesian argument, the Austrian theory has many weak-points and doesn't fully hold up under scrutiny. I won't say that all Keynesian theory is correct or that it works all the time- but it cannot be denied that under certain circumstances spending by the government will stimulate the economy. Further, great benefit can be achieved as long as the spending is under the right circumstances in the right manner and then curtailed when/if the economy is able to stand on it's own. Even better if once the economy is stronger, measures are taken to pay back the debt that previously accumulated- as we did in the late 90's/

    As for your thesis that you can't predict exactly how things are going to go, that is certainly true- however, I would argue that you can many times predict what is likely to happen there are probabilities and previous results to help determine a course of action. In addition there are also situations like we experienced with the financial crash where you have a decision between the somewhat known results of what would happen if you did a large bailout and the almost completely unknown results of what would happen if you let everything fail.
    Time for a little factual corrective :

    1. The economy is stagnant, has been stagnant and promises to be for several more years. We have growth of less than 2 % making for the WORST post-recession recovery in history. Personal income is down. Were it not for government hiring, unemployment would be much higher than it is. "Big business" was NEVER in danger of going bankrupt except for the big banks and GM and Chrysler. As I have repeatedly pointed out, if the Fed lends me money at effectively less than zero and I lend it out at 4 to 7 % , I too can make billions. So could you. Likewise, it remains to be seen just how "profitable" GM will prove to be. The jury is still out although the most likely result appears to be that GM's results will be mixed at best.

    2. If only Obama wanted to just go back to Clintonian times. First of all, there is no "internet bubble " now to juice the Dow and Nasdaq as under Clinton. Secondly, thanks to Obamacare taxes and higher state and local taxes, the tax burden and government spending as a % of GDP are approaching levels not seen since W.W. II. And Obama wants MORE stimulus spending; more Solyndras , more Fiskers.

    3. I have already explained how and why the debt we have accumulated will NEVER be "paid back". Never ! The best we can do is lower government spending as a % of GDP and drop the deficit to a manageable level ( or maybe even surplus in a decade or so ) to maintain our credit rating with affordable interest rates on our debt and enable us to exchange new debt for old.

    4.We got into this mess ( partly ) by following Keynesian economics, ever since FDR.

    5. If we compare government stimulus to private sector investment, there is no comparison. We can look at the Harding-Coolidge tax cuts ; the JFK- Johnson tax cuts; the Reagan tax cuts; the CLINTON tax cuts ( which the Libs and Keynsians love to pretend never happened ) and even the Bush the Dumber tax cuts. We must also look at the Wilson tax increases; the Hoover-FDR tax increases which prolonged the Depression; the Truman-Eisenhower policies which gave us four recessions in 15 years; the Nixon-Ford-Carter stagflation.

    6. You've already let your slip show when you posted that government spending is better than private sector spending ; that the government is smarter than we are and can spend our money better than we can. I paraphrased a bit but that is what you previously posted. Remember ? " Further, great benefit can be achieved AS LONG AS THE SPENDING IS UNDER THE RIGHT CIRCUMSTANCES IN THE RIGHT MANNER and then CURTAILED when / IF ( ? ) the economy is able to stand on it's own. " Your words. Not mine. "Benefit" for whom ? Obama campaign contributors ? You really think that government bureaucrats are smarter than a free market to determine the "right circumstances " and "right manner" and know when to "curtail" spending when or IF ( ? ) the economy can stand on its own ???? FDR's brain trust got it wrong when they cut spending and raised taxes in 1937 resulting in the Great Recession of 1938. Truman got it wrong. Eisenhower got it wrong. LBJ, Nixon , Ford, Carter and Bush the Smarter all got it wrong. Clinton got it wrong in his first term. What is telling you that Obama and a spendthrift Congress are going to get it right ? Cats do not bark. Congress will spend every nickel they can lay their hands on. How do you think so many states and cities have become effectively bankrupt ? Just how many $400,000 per year state troopers do you think California can afford ? Why are so many low tax states doing so much better than high tax states making all those smart "investments" in green energy and HSR to nowhere ? Hmmm ?

    We are SUPPOSED to keep this forum as apolitical as possible. Part of that involves TOLERANCE for views we neither like nor agree with. I'm sorry but it just won't do for you to pretend to somehow be purer and less "ideological" than the rest of us.

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    Quote Originally Posted by Eric Stoner View Post
    Time for a little factual corrective :

    1. The economy is stagnant, has been stagnant and promises to be for several more years. We have growth of less than 2 % making for the WORST post-recession recovery in history. Personal income is down. Were it not for government hiring, unemployment would be much higher than it is. "Big business" was NEVER in danger of going bankrupt except for the big banks and GM and Chrysler. As I have repeatedly pointed out, if the Fed lends me money at effectively less than zero and I lend it out at 4 to 7 % , I too can make billions. So could you. Likewise, it remains to be seen just how "profitable" GM will prove to be. The jury is still out although the most likely result appears to be that GM's results will be mixed at best.

    2. If only Obama wanted to just go back to Clintonian times. First of all, there is no "internet bubble " now to juice the Dow and Nasdaq as under Clinton. Secondly, thanks to Obamacare taxes and higher state and local taxes, the tax burden and government spending as a % of GDP are approaching levels not seen since W.W. II. And Obama wants MORE stimulus spending; more Solyndras , more Fiskers.

    3. I have already explained how and why the debt we have accumulated will NEVER be "paid back". Never ! The best we can do is lower government spending as a % of GDP and drop the deficit to a manageable level ( or maybe even surplus in a decade or so ) to maintain our credit rating with affordable interest rates on our debt and enable us to exchange new debt for old.

    4.We got into this mess ( partly ) by following Keynesian economics, ever since FDR.

    5. If we compare government stimulus to private sector investment, there is no comparison. We can look at the Harding-Coolidge tax cuts ; the JFK- Johnson tax cuts; the Reagan tax cuts; the CLINTON tax cuts ( which the Libs and Keynsians love to pretend never happened ) and even the Bush the Dumber tax cuts. We must also look at the Wilson tax increases; the Hoover-FDR tax increases which prolonged the Depression; the Truman-Eisenhower policies which gave us four recessions in 15 years; the Nixon-Ford-Carter stagflation.

    6. You've already let your slip show when you posted that government spending is better than private sector spending ; that the government is smarter than we are and can spend our money better than we can. I paraphrased a bit but that is what you previously posted. Remember ? " Further, great benefit can be achieved AS LONG AS THE SPENDING IS UNDER THE RIGHT CIRCUMSTANCES IN THE RIGHT MANNER and then CURTAILED when / IF ( ? ) the economy is able to stand on it's own. " Your words. Not mine. "Benefit" for whom ? Obama campaign contributors ? You really think that government bureaucrats are smarter than a free market to determine the "right circumstances " and "right manner" and know when to "curtail" spending when or IF ( ? ) the economy can stand on its own ???? FDR's brain trust got it wrong when they cut spending and raised taxes in 1937 resulting in the Great Recession of 1938. Truman got it wrong. Eisenhower got it wrong. LBJ, Nixon , Ford, Carter and Bush the Smarter all got it wrong. Clinton got it wrong in his first term. What is telling you that Obama and a spendthrift Congress are going to get it right ? Cats do not bark. Congress will spend every nickel they can lay their hands on. How do you think so many states and cities have become effectively bankrupt ? Just how many $400,000 per year state troopers do you think California can afford ? Why are so many low tax states doing so much better than high tax states making all those smart "investments" in green energy and HSR to nowhere ? Hmmm ?

    We are SUPPOSED to keep this forum as apolitical as possible. Part of that involves TOLERANCE for views we neither like nor agree with. I'm sorry but it just won't do for you to pretend to somehow be purer and less "ideological" than the rest of us.
    Way off on pretty much every count Eric, I won't even take the time to correct the errors as we've already been through this stuff numerous times.

    My point overall point is that this section of the forum is meant for discussing taxes, investing and fees- speculative, ideological quasi political posts should have no place here- on either side of the equation. I am sure that some will assert that this kind of information is necessary for giving direction for investments etc, but the ones that assert that are almost always incorrect. It is entirely possible to give "real world" non-ideological based advise or recommendations without delving into speculative guesses that have little to do with actual reality and very seldom come to pass.

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    Rather than rehash ALL the previous discussions we have had on these and other related topics, let's just agree to disagree on what is better and best as far as economic policy is concerned. The FACTS and the HISTORY are there for everyone to read for themselves.

    Again you insist on trying to kill the messenger as far as Melonie is concerned. First of all, she has made it clear many times that she sometimes posts stuff "for what it is worth " ; for folks to think about etc.

    More importantly, neither Melonie nor I ever said that the "doom and gloom" will happen tomorrow. Some of what we predicted has already happened. We've both been able to post a lot more " I told you so" type stuff than anyone else. Leaving that aside, some things that directly impact on investing are impossible to separate from ( God help us ! ) politics. What we can do, and what we try to do, is avoid the advocacy and spin and just relate the facts as best we can. That being said, nobody has hammered the current crop of Republicans harder than I have so a lot of this is certainly bi-partisan if not as apolitical as some of us would like.
    Last edited by Eric Stoner; 01-02-2013 at 12:33 PM.

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    Quote Originally Posted by Eric Stoner View Post
    Rather than rehash ALL the previous discussions we have had on these and other related topics, let's just agree to disagree on what is better and best as far as economic policy is concerned. The FACTS and the HISTORY are there for everyone to read for themselves.

    Again you insist on trying to kill the messenger as far as Melonie is concerned. First of all, she has made it clear many times that she sometimes post stuff "for what it is worth " ; for folks to think about etc.

    More importantly, neither Melonie nor I ever said that the "doom and gloom" will happen tomorrow. Some of what we predicted has already happened. We've both been able to post a lot more " I told you so" type stuff than anyone else. Leaving that aside, some things that directly impact on investing are impossible to separate from ( God help us ! ) politics. What we can do, and what we try to do, is avoid the advocacy and spin and just relate the facts as best we can. That being said, nobody has hammered the current crop of Republicans harder than I have so a lot of this is certainly bi-partisan if not as apolitical as some of us would like.
    You are so wrong it's not even funny. Your combined "I told you so's" besides being being incredibly arrogant amount to a small fraction of the amount of times the predicitons are completely wrong.

    It is extremely easy to post information pertinent to investing without involving politics or ideology. Very few "pertinent facts" are ever posted by Melonie and her sources, what gets posted is Melonie's "All Bad All the Time....and getting worse" ideological talking points that rely on extremely narrow thinking and sometimes outright lies to back up their premise. There is no balance and very little overall reality in per posting, she has turned this section of the forum into a right-wing ideology blog, and a very inaccurate one at that.

    I don't want to get caught up in the never-ending need to give examples that should be apparent- but while standard retail sales may have been lower than desired, online sales set growth records. How come that is never mentioned?, I'll tell you why, because right-wing ideology operates from a state of fear and worry and is almost always incapable of being aware to the fundamental changes that are always inevitably occurring. We are entering a new age and brick and mortar is giving way to online- to focus ONLY on the decline of brick and mortar and ignore the future and growth of online is extremely irresponsible at best if someone is purporting to be giving investing or financial advise.

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    Jimboe, I'm not surprised that you attacked me for being a follower of the Austrian school. You favor inflation, it seems, so it makes sense that you attack any who find inflation dangerous, problematic, and/or counter-intuitive. I get it. However, to favor a school of economics like Keynesianism that many, if not most, working investors and economists have dropped or adapted and replaced with monetarism or some rehashed, redone Keynesianism simply shows that you have not studied the actual math behind it.
    I took a class in college in which the professor, an admirer of FDR, tried to explain Keynes' ideas. I really tried to understand, and as I looked over the notes, the data, and the explanations, it was obvious that Keynes used ideas more than math to explain the effects of his ideas. "Spending more + inflation= restarting the economy" is not math. If it worked, economists would be Keynesian and not monetarist, Austrian, or Post-Keynesian. Government has and will always favor Keynesian economics not because of function, but because of votes: it allows for spending and gives excuse to do so. (However, is Keynes' defense, these market procedures were only to be used in downturns... but politicians never stopped using them.)
    I have no issue arguing the numbers, the facts, the ideas, etc. However, to get on a post in which an article is quoted, attack the OP for posting "garbage," and continually try to make any post seem political is a bit silly. As far as Austrian economics being weak in certain areas, I agree that ANY economic school right now has weaknesses. Keynesianism has been phased out as it is almost as weak as laissez faire economics were when they were phased out. Austrian economics takes note of the inability of governments to control markets, so I agree with that. Show me a controlled market in the past, and I will show you a fallen empire. (Nero's cutting the coinage with copper to depreciate value 20%, the Achaeans over-zealous empire-building with the Peloponnesian War, the Weimar Republic and hyperinflation to avoid reparations, etc etc)
    Personally, I am not affiliated with either party, but I do find that many of Melonie's posts are helpful to understand why taxes, fees, and investing are changing--inflationary policies and extra government mandates make life more difficult for everyone but the cowardly thief. You, on the other hand, rarely explain why things are changing economically; instead, you tell dancers such as myself that things are changing, that I should like it, and I'm stupid for being critical, asking questions, or trying to historically compare our current situation to past ones. Telling someone that interpreting current articles and numbers is "speculative guessing" discourages ANYONE from posting ANYTHING of note.
    And if you are so sure of the predictive capabilities of certain economic models, then why in the bloody h-e-double are the US, the EU, Japan, and other places in economic troubles? If the experts in power have such models at their disposal, why in the world would recessions last more than a few quarters? I find your trust in government a bit unsettling.

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    ^^I'm afraid Bunny that you haven't read too many of my posts or correctly understood my position. One of the central themes that I have mentioned many times is that because of the almost unlimited variables that are a constant (as you also allude to) it is very difficult and even dangerous to subscribe to or attempt to implement one ideology or plan. What is most effective and realistic is to asses the unique situation and come up with a unique plan than may borrow from several different disciplines or theories. I think that as a general rule ALL of anything is not likely to work- ALL Capitalism, ALL Socialism, ALL Keynesian or ALL Austrian. Depending on the specific situation and the many minor components involved different parts of disciplines will solve different problems, but to do that there has to be open-mindedness and a willingness to break from the orthodoxy of ideology that isn't found too often.

    Melonie makes some very inciteful and informing posts regarding taxes, fees and investing. In addition she has genuine real world experience, serves as a role-model to many of the girls on this site and doles out that information very generously and in a great manner. What I take issue with however are the posts that she makes that are devoid of facts and that are not only purely speculative, but that omit, twist or downright lie to support her ideology. I am also put off by the fact that these sorts of posts are nearly 100% negative and do a very poor job of informing people of what is actually happening. Those sorts of post which are in effect pure opinion, quasi-political and very often completely inaccurate have no place in the format that Dollar Den was set up in. I am all for Melonie expressing her passion for her beliefs and would have absolutely no problem with her doing it in a political/economic blog or even in a separate section of Stripper Web that was set up for that purpose. It's also not like it's a few posts here there, the posts are made almost compulsively and it overwhelms the section. I know for a fact from private messages I've received that many people don't even go into Dollar Den because it's been hijacked and turned into a right-wing ideology platform.

    You falsely interpret that I favor inflation- I favor whatever is the smartest and best policy for us to follow right now, under the present circumstance. Once those circumstances change, then I will favor a change in policy that reflects the new position we are in. The problem I see with a lot of people is they try to make things black and white and all or nothing. No, I am not in favor of inflation- I am in favor of strengthening a weakened economy with spending until it is strong enough to start scaling down the spending. Once it is even stronger and more stable I am in favor of then paying off as much or all of the debt that was incurred in getting it out of the weak spot. Right now we do not currently have a debt problem, interest rates are at record lows, inflation is not a big factor. Right now our biggest problems are a lack of jobs and weakened economy. We are exponentially better than we were a few years ago when we were losing 500,000 jobs per month and collapse looked imminent, but we still have a ways to go. I am in favor of continuing to spend on infrastructure (which we will need anyway) and programs that will train workers and provide opportunities for what will be the economic drivers of the next 10-20 years- energy tech, bio-tech, medical tech, communication tech and other programs that the public is probably not even aware of yet. IMHO, every dollar we invest into those areas will pay off exponentially down the road.

    I don't tell you that "things are changing and to like it", I tell you that things are changing, period. They have always changed and always will change. It is then up to you whether you will be aware of that fundamental truth and adjust to it to your benefit or be ignorant of it and be a victim of it. As mentioned, you must have not read to many of my posts, I've explained pretty thoroughly what, why and how things are changing. The changes are at every level and in varying stages of development. On the one hand, we are going from brick and mortar to online. On another level and over a much larger time-frame, the US has gone from a largely rural economy and society to a largely modern and urban economy and society- many of the parameters and systems however have not caught up. In 1850, healthcare, gun-control and welfare rules worked quite well, almost everyone produced their own sustenance and could fully support their own families, guns were relatively weak, there wasn't as much population density and the number of people affected by various types of mental illness was much lower, in terms of healthcare. the country doctor had an extremely limited amount of things he could do to help the sick, most of which would only cost a few ears of corn. Obviously, a lot of things have changed since then and if you try to use the old parameters you are going to run into trouble on numerous fronts, as we have.

    I have never discouraged anyone from asking questions and I totally encourage comparing historical situations, I don't know where you got that from. As for "speculative guessing", that is what I call when someone tries to fit reality into an inflexible ideology and they wind up with all kinds of errors in their assumptions and then have to lie, twist or omit facts when the end results don't meet their predictions (as they rarely do). When someone asserts with certainty that if taxes go up, spending and the economy will get hurt- that is "speculative guessing", there are actually quite a few examples of the opposite happening in addition to hundreds of other variables that could cause any number of outcomes.

    As for government getting involved- there are no certainties and you can certainly have incompetent government get involved and screw thing up worse than they could be otherwise. But there are times when efficient government involvement is the best if not only tool to fixing a problem. Teddy Roosevelt breaking up the large trusts in the 1900's is a good example IMHO. In capitalist America, I trust certain parts of the government to look after the general well-being of the country and it's citizens a lot more than I do multi-national corporations who are solely dedicated to short term profit. I think the US government has done a great job of getting us out of the previous financial crisis- when you look at 500,000 job losses per month, whole industries on the brink of bankruptcy, banks close to closing their doors- I have a hard time seeing how anyone can say we haven't made substantial improvement. We have recovered better than all but 2 countries and are poised for future improvement better than almost anyone. I trust certain governments quite a bit and am extremely distrustful of others, I am not naive or pollyanna. I lived in New York in the 1990's and felt that on both the national and city level the governing was excellent. Between Clinton, the Republican congress and Gulianni as mayor of New York, I can't think of much you could complain about. There was great prosperity and New York City which had previously been an urban war zone was peaceful, safe and dynamic. If you want to see some truly great, effective and creative government in action google Jaime Lerner and Curitiba.
    Last edited by jimboe7373; 01-01-2013 at 01:42 AM.

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    you wanted an 'accurate' indicator of America's true economic state ... here you go ...

    from a 'neighbor' of mine Simon Black at

    (snip)"As we slide into the end of yet another year in which the nominal price of gold has posted a positive return, I thought it would be interesting to take a look back on history to get a better understanding of where we are today.

    It’s obvious that, for many reasons, the size of the global economy is far greater than it was decades ago. We learn in any basic economics course that, over the long run, enhanced productivity and increased technology drive long-term production gains.

    Certainly, an economy can produce more widgets if you’re a lean, mean, automated machine… as opposed to a blacksmith with a hammer and forge.

    But there are other factors as well. Population growth. Accounting standards. And of course, the continued inflation of the currency. $1 today buys a whole lot less today than it did a century ago, so when comparing, it’s important to find a better standard of measurement.

    There are a number of pricing yardsticks we could use… like the cost of a New York City cinema ticket (25 cents in 1935, $20 today). But it would be awkard to calculate GDP in terms of billions of cinema tickets.

    Gold is a much more appropriate (though still imperfect) long-term standard of pricing, with its history as a store of value dating back to the ancients.

    With this in mind, I collected the appropriate data on gold prices, population, and GDP in the United States since 1791 and plotted GDP per capita denominated in ounces of gold.





    This measurement smooths out changes in economic growth due to currency inflation and changes in the population, making it much easier to compares apples to apples.

    The results are rather startling. In its earliest days, US GDP per capita was a mere 2.6 ounces of gold per person per year. But this grew quickly, effectively doubling in the 20 year period from 1791 to 1811.

    Most of the 19th century proved difficult for growth, as it took another seven decades (over three times as long) for GDP per capita to double again. This makes sense given that the 19th century was marked by several costly wars (War of 1812, Mexican War, Civil War, etc.)

    An industrialized American economy began to take off in the 20th century; GDP doubled from 12.00 ounces of gold per capita in 1892 to 23.55 ounces of gold per capita in 1916. And by 1929, it had almost doubled again to 41.12 ounces of gold per capita.

    We know what happened after that– years of depression and economic stagnation. The economy bottomed in 1934 at 14.93 ounces of gold per capita, and then it began a multi-decade rise, peaking at 139.05 ounces of gold per capita in… 1970. This was right before Nixon closed the gold window. And the economy never touched that level again. How interesting.

    Since 1970, it’s been a series of peaks and troughs. The economy boomed during the 1990s, then ran out of steam quickly in the ensuring dot-com/housing/sovereign bust.

    We have just ended the year at 28.40 ounces of gold per capita (based on trailing twelve month GDP data). This is an astoundingly low figure.

    To put it in perspective, since the end of the Great Depression, US GDP per capita has only been under 30 ounces of gold two times– this year, and 1980. That’s it.

    In fact, the post-war average for the US economy is 72.83 ounces of gold per capita, so the economy today is an amazing 61% off this historical average.

    Right now, the largest economy in the world is producing as much as it did in 1931, almost at the peak of the Great Depression. And no matter what the talking heads and politicians say, the data show that the trend is getting worse. Today’s figure is worse than last year, which was worse the year before. This trend of economic contraction goes back to 2001.

    Curiously, this time period also coincides with the greatest expansion of debt and the monetary base in history. Hmmm. Coincidence?"(snip)

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    ^^^You've got to be kidding me. This is exactly what I'm talking about, you are trying to pass off something that is in no way an effective indicator as proof for your ideological views.

    from the article itself: ".....much more appropriate (though still imperfect) long-term standard of pricing"

    Also this from a commentator:

    "Why would one price anything against an arbitrary Metal? So if the price of Gold falls by 50% next year, are we twice as productive compared to then? To use your own words, why not compare actual Apples of then to Apples of today against GDP? Intuitively, does this make any sense? Can anybody really say with a straight face that we are in a comparable situation to the depression? If we are, then what is Greece, or Spain, or pretty much anywhere?
    Very silly article."

    Read more: http://www.sovereignman.com/highligh...#ixzz2GkKtvl7Q


    Here is some additional intel on the economy for the previous year:


    Financial stocks had a stellar year in 2012, leading the industry groups in the Standard & Poor's 500 index. Utility companies were the worst performing group. Nine of the 10 sectors in the index advanced in 2012.

    - Financials. The stocks of insurers and banks, led by Bank of America and Citigroup, gained 26.3 percent.

    - Consumer discretionary. Home builder PulteGroup and appliance maker Whirlpool were among the biggest gainers, pushing this sector up 21.9 percent.

    - Heath care. Drugmakers Eli Lilly and Merck gained, pushing the industry up 15.2 percent.

    - Information technology. Oracle and Apple were among the gainers in the sector, while Hewlett-Packard and Advanced Micro Devices were among those that had a bad year. The sector advanced 13.1 percent and remains a favorite of analysts.

    - Telecommunications. Sprint surged after Japanese company Softbank said it was taking a big stake in the company. The industry advanced 12.5 percent.

    - Industrials. General Electric had a good year, as did toolmaker Stanley Black & Decker, pushing the sector 12.5 percent higher.

    - Materials. Gains for Dow Chemical and agricultural products company Monsato pushed the industry group up 12.2 percent.

    - Consumer staples. Retailers such as Wal-Mart and CVS Caremark had good years. Brewer Molson Coors struggled. The sector rose 7.5 percent.

    - Energy. Oil prices fell about 8 percent in 2012. Energy companies like, Chevron, BP and Exxon tracked mainly sideways. The sector rose 2.3 percent.

    - Utilities. Often regarded as a safe haven, these stocks fell out of favor with investors this year. After advancing 15 percent in 2011, they fell 2.9 percent this year.
    http://www.miamiherald.com/2012/12/3...e-biggest.html

    In addition:

    "Home prices climbed more than forecast in October, indicating a rebounding real-estate market will bolster the U.S. economy for the first time in seven years"

    "....a growing population and an improving economy spur demand for housing. The turnaround in real estate is buoying household confidence and wealth,"

    " Higher property values have “added about a trillion dollars to household wealth just since the beginning of this year.”

    http://www.bloomberg.com/news/2012-1...-rebounds.html

    More good news with November Home sales:

    "Sales of existing homes rose 5.9 % to an annual pace of 5.04 million, according to a report from the National Association of Realtors (NAR), an industry group."

    "It was the highest level since November 2009, when home buying tax credits were in effect, and sales spiked to 5.44 million.
    November sales far exceeded industry expectations -- they were higher compared to 4.76 million in October, and 4.39 million in November 2011
    "

    "An improving economy not only enables more Americans to buy homes, it also helps financially stressed homeowners keep up with their mortgage payments and avoid foreclosure. Bank repossessions and other foreclosure filings have fallen to their lowest level in more than five years, according to RealtyTrac, the online marketer of foreclosed properties."

    "Sales of distressed properties, which includes foreclosed homes and short sales, fell to 22% in November, from 24% in October and 29% a year earlier, according to NAR."

    "The NAR also reported a 10.6% increase in the median price of homes in November to $180,600, compared to last year."
    http://money.cnn.com/2012/12/20/real...les/index.html
    Last edited by jimboe7373; 01-01-2013 at 11:19 AM.

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    ^^^ again you are rolling out mainstream financial media statistics as if they really represent positive 'real world' economic developments. However, in reality, the vast majority of these mainstream financial media statistics can trace their positive spin to either A. record amounts of added gov't debt / money printing, or B. renewed issuance of low equity requirement mortgages / consumer credit to 'subprime' borrowers, and/or C. the near total disavowing of actual 'real world' US dollar inflation.

    At any rate, for the benefit of other DD readers, and FOR WHAT IT's WORTH, here is some counterpoint opinion to the mainstream financial media 'spin' ... from


    (snip)" Between government and central bank interventions, accounting fraud, control fraud, the computer hugger-mugger of algorithmic trading, and AWOL rule of law, the financial markets have practically destroyed themselves. They can't be depended on to express the real value of things and capital formation struggles against the headwinds of peak cheap energy on top of massive fraud and swindling. The markets can only blow up. When the wreckage clears and new, smaller markets form, as they will, they must operate differently, with new rules and restraints, because the blow up of today's markets will be such a trauma that nobody will venture to engage with them if they don't. A world without simplified and honest capital, commodity, and equity markets would beat a quick path back to a dark age, and in the process a lot of people will die of cold and starvation.

    The full workout of all that may be some years further out, but the blowout will commence in 2013. The glue that held these markets together was faith that they meant something -- and that faith has been pissed away by fools in high places who drained all the honesty out of them. It was a classic case out of the Joseph Tainter playbook: diminishing returns of ever-increasing complexity addressed with ever-more layers of complexity, larded with systematic lying based on mystifying, opaque jargon, sanctioned statistical misreporting, felonious cronyism, and scuttling of the rule of law. In short, the markets have been taken over in effect by a criminal racketeering syndicate. In doing this, so much resilience has been removed from these market structures that they are riddled with rot, like a mansion infested with carpenter ants. In other words, borrowing a term from Taleb, they are hopelessly fragile. Any little vibration could reduce the whole creaking arrangement into a heap of rubble and ashes. There's plenty of vibration available out there. Events are humming.

    The debt mountains in the USA and elsewhere far overshadow the equity and commodity market molehills, and unpaid debt will eventually overcome all the forces of untruth. Debt is a subsidiary of the force known as reality. Its will cannot be denied, even by Goldman Sachs, JP Morgan, the US Treasury, and the Federal Open Markets Committee. And the unwinding of unpaid debt, honestly acknowledged or not, will thunder through the system sucking wealth out of advanced societies so efficiently that it will make the Seven Plagues of the Bible look like a flat tire on a sunny day.

    So, finally my picks for 2013:

    -- Dow 4000 (What!? Did he say that!? Again!?). Even the algos will run squealing into the underbrush this time.

    -- Gold $2500 by 12/31/2013 (and headed higher) after a Q-1 deleveraging swoon. Silver $125. Uncertainty trumps greed and fear.

    -- Two-way Stagflation -- massive asset deflation combined with high energy and food costs. Americans go broke fast, go hungry, go nowhere.

    -- California, Illinois, and New Jersey beg the broke federal government for bailouts. The federal government pretends to bail them out. Austerity has a field day.

    -- Despite willingness to do so, the Federal Reserve can no longer "print" money to overcome the deflationary contraction of wealth. They are finally "out of ammunition." They will try nonetheless. Consequently some nations will stop accepting dollars for trade, possibly the Middle Eastern oil exporters. That would be very bad news.

    -- Shale oil and gas production stop increasing, possibly turns around to decline. The event hugely demoralizes "energy independence" cornucopians.

    -- Gasoline shortages return to the USA on a scale last seen in the 1970s. Cause: broken oil market allocation system. Some regions suffer more than others.

    -- Drought continues in the US heartland. The grain belt withers in 2013. Dixieland cooks like a chicken-fried steak. Food costs go crazy. The American public finally begins to freak out when confronted with $9 boxes of Cheerios.

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    again you are rolling out mainstream financial media statistics as if they really represent positive 'real world' economic developments. However, in reality, the vast majority of these mainstream financial media statistics can trace their positive spin to either A. record amounts of added gov't debt / money printing, or B. renewed issuance of low equity requirement mortgages / consumer credit to 'subprime' borrowers, and/or C. the near total disavowing of actual 'real world' US dollar inflation.
    Um, yes- that is the whole premise to spending your way out of a recession. Right now spending and borrowing aren't our biggest problem and by strengthening the economy in this manner we will be in a better position to pay down the deficit - like we did in the 90's.

    Inflation: http://www.tradingeconomics.com/unit.../inflation-cpi , and interest rates are extremely low. We have ceased pumping money into the economy in the form of bailouts as they have done their job of stabilizing the economy which was in free-fall. Much of the banking center bailout has been paid back, and with a profit. In fact profits for the treasury so far from AIG and Banking paybacks are about $46 Billion, that will help ease what is expected to be roughly a $12 Billion loss on the GM bailout.

    "The administration is hoping to offset the losses from the G.M. rescue with the profits from its A.I.G. investments and the bank recapitalization program, which together have reaped about $46 billion for taxpayers." http://dealbook.nytimes.com/2012/12/...hin-15-months/


    As for the rest of your post, the predictions you/the person you cut/paste make are pretty much identical to what you predicted for 2012, none of which seemed to materialize.


    By the way, here are some from you back in 2010:

    ■California, Illinois, New York and several other states were always headed for functional bankruptcy -- the numbers just don't work and the people in charge aren't doing anything about it. The only question was whether their bankruptcy would take the form of muni bond default and mass layoffs, or a federal bailout that created zombie states to go with our zombie banks.

    ■To restate Mead's point: With the Democrats in charge, a bailout was pretty much guaranteed. No way would that party let its biggest electoral strongholds lay off hundreds of thousands of public employees. But a divided government has a more mixed set of incentives. A bunch of blue states defaulting on their bonds and cutting back their public sectors would be painful for Republicans but disastrous for Democrats. So the Republicans might decide it's worth it.

    ■A default would send the financial markets back into chaos (remember that muni bonds make up the "risk free" part of a lot of conservative portfolios). A bailout would shift the crisis from the states to the dollar, maybe causing foreign investors to finally catch on to the Ponzi scheme we've been running.

    ■And that's if a few US states go bankrupt more-or-less in isolation. Let them fail at the same time Spain and Portugal are forcing Germany to bail them out, and then who knows? National political considerations might be trumped by global fears, leading to...a headache for anyone trying to follow this thread much further. For now it's enough to know that state finances will be headline news in the coming year.


    Wrong on every count. No Zombie states, Hundreds of thousands of public employees WERE layed off in Democratic strongholds, no default or financial market chaos, no foreign investors running, No US states going bankrupt as all!.

    You seem to have this delusional obsession that ALL the money circulating in the US is from bailouts and government spending. We are gaining all types of new revenue: from various energy sources, new dynamics are reversing the trend of US companies moving overseas, $Billions are being receive by direct foreign investment, this is much is coming in from China alone: http://www.prokerala.com/news/articles/a350512.html, the EB-5 Visa program is growing and is bring many more $Billions in and creating US jobs: http://www.nytimes.com/2012/12/31/us...anted=all&_r=0 . These are just a hundful of the items that are assisting the US economy and adding to growth.
    Last edited by jimboe7373; 01-01-2013 at 09:30 PM.

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    I have a suggestion : Would the resident Keynesians ( and presumably Krugie fans ) please explain France.

    A definitive study of France was recently published analyzing their economy over the last 40 years .

    They've certainly spent a lot of money. Including quite a bit on things like high speed rail ( TGV ) , their nuclear industry, the Concorde and Chunnel. They do have a good medical and health care system. Taxes have been high. It's a place that more people want to move to than leave. And compared to many other European countries , they are relatively solvent.

    BUT : Economic growth over the last 40 years has averaged barely 2 % . Unemployment has averaged over 8 %. Their immigrants are almost exclusively poor and uneducated while their emigres are France's best and brightest.

    Is that what we want for the U.S. ? Do we want French tax rates ? Do we want our talented and able moving OUT of the country as France is now seeing ?

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    We did have French tax rates in the 1960's, and we had much stronger economic growth and lower unemployment then, than we have today. We also had stronger economic growth and lower unemployment in the 1960's, than we did in the 1980's after Reagan's tax cuts.

    French workers don't work as many hours as American workers and they take longer vacations, but on an hourly basis, French economic output is about the same as America's.

    http://www.ilo.org/global/about-the-...--en/index.htm

    -snip-
    However, Americans work more hours per year than workers in most other developed economies. This is why, measured as value added per hour worked, Norway has the highest labour productivity level (US$ 37.99), followed by the United States (US$ 35.63) and France
    (US$ 35.08 ).
    -snip-
    Last edited by eagle2; 01-14-2013 at 10:19 PM.

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    Quote Originally Posted by eagle2 View Post
    We did have French tax rates in the 1960's, and we had much stronger economic growth and lower unemployment then, than we have today. We also had stronger economic growth and lower unemployment in the 1960's, than we did in the 1980's after Reagan's tax cuts.

    French workers don't work as many hours as American workers and they take longer vacations, but on an hourly basis, French economic output is about the same as America's.

    http://www.ilo.org/global/about-the-...--en/index.htm

    -snip-
    However, Americans work more hours per year than workers in most other developed economies. This is why, measured as value added per hour worked, Norway has the highest labour productivity level (US$ 37.99), followed by the United States (US$ 35.63) and France
    (US$ 35.08 ).
    -snip-
    And you explain the French average annual GDP growth of less than 2 % and average unemployment rate of over 8 %, how ? Please remember we are talking about over the last 40 years. During that same era , U.S. GDP growth averaged over 3.5 % and unemployment was much lower.

    After JFK's tax cuts , our top MARGINAL rate was 70 % . I don't how the French tax system works compared to ours vis a vis tax rates. If you know , please help us out.
    I DO know that their tax evasion rate and their number of tax exiles ( they have a wealth tax ) is much higher than ours. And both are increasing.

    Nobody said anything about productivity. Although France's numbers are good.

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    I already told you. French workers work much less hours than American workers, which is why their economy hasn't grown as fast as America's.

    Over the past few years, France has been following conservative policies of austerity and strong currency, which is why their economic growth is so slow, and unemployment rate so high.

    http://www.guardian.co.uk/commentisf...y-plan-mistake

    A much better example of a country that follows Keynesian policies would be China. China's top tax rate is 45 percent, in addition to a 17 percent VAT, and China's government has been spending heavily on public works projects to grow their economy. China probably has the fastest growing economy in history over the past 20 - 30 years. Another good example would be the US, from the 1930's to the 1960's.

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    Quote Originally Posted by eagle2 View Post
    I already told you. French workers work much less hours than American workers, which is why their economy hasn't grown as fast as America's.

    Over the past few years, France has been following conservative policies of austerity and strong currency, which is why their economic growth is so slow, and unemployment rate so high.

    http://www.guardian.co.uk/commentisf...y-plan-mistake

    A much better example of a country that follows Keynesian policies would be China. China's top tax rate is 45 percent, in addition to a 17 percent VAT, and China's government has been spending heavily on public works projects to grow their economy. China probably has the fastest growing economy in history over the past 20 - 30 years. Another good example would be the US, from the 1930's to the 1960's.
    The U.S. from the 1930's to the 1960's ? This has been explained too many times to count. Up until about 1939 we were in the throes of the Depression and the FDR- Federal Reserve caused Great Recession of 1938. Starting in 1940 , defense spending increased dramatically culminating in W.W.II. After W.W. II we had about the only remaining industrial base untouched by the destruction of W.W.II and maintained that advantage well into the 60's. We had top marginal tax rates of 91 % ( which was lowered to 70 % in 1964 ) from 1937 through 1981. We had solid economic growth BUT we also had periods of high inflation and at least seven ( 7 ) major recessions after W.W. II.

    As for China, nobody relies on THEIR numbers. More reliable estimates from the CIA and the U.N. show that all is not well in China despite huge spending on internal infrastructure.

    I'm sorry but French problems go a lot deeper than their comparative laziness vis a vis U.S. workers. They also have a much higher tax burden and a comparatively huge bureaucracy compared to ours.

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    During FDR's first term, when he significantly increased spending to pay for public works, the economy grew at 14 percent and unemployment fell from 25% to 15%. During his second term, when he cut spending to balance the budget, we went back into recession. Towards the end of his second term, he significantly increased government spending to buildup our military, and the economy began to grow again, and the unemployment rate dropped significantly. During the 10 years following the start of the Great Depression, the more the government spent, the more the economy grew and the lower the unemployment rate fell. When the government spent less, economic growth slowed and the unemployment rate increased. I know you like to blame this on a tax increase, but we still had strong economic growth after taxes were increased and the government greatly increased spending to buildup our military.

    Most of our economic growth after World War II came from greatly increased domestic demand. GI's returning from the war had money to spend, and also thanks to higher wages, American workers had more money to spend. More Americans could afford houses and cars, and later, televisions.

    I doubt there is anyone that disputes China has had amazing economic growth over the past 20 - 25 years.

    The US probably had a higher tax burden in the 1950's and 1960's than France does today, and we also had strong economic growth.

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    Default Re: Food for Thought for the New Year - 'The Keynesian Legacy Unravels'

    Quote Originally Posted by eagle2 View Post
    During FDR's first term, when he significantly increased spending to pay for public works, the economy grew at 14 percent and unemployment fell from 25% to 15%. During his second term, when he cut spending to balance the budget, we went back into recession. Towards the end of his second term, he significantly increased government spending to buildup our military, and the economy began to grow again, and the unemployment rate dropped significantly. During the 10 years following the start of the Great Depression, the more the government spent, the more the economy grew and the lower the unemployment rate fell. When the government spent less, economic growth slowed and the unemployment rate increased. I know you like to blame this on a tax increase, but we still had strong economic growth after taxes were increased and the government greatly increased spending to buildup our military.

    Most of our economic growth after World War II came from greatly increased domestic demand. GI's returning from the war had money to spend, and also thanks to higher wages, American workers had more money to spend. More Americans could afford houses and cars, and later, televisions.

    I doubt there is anyone that disputes China has had amazing economic growth over the past 20 - 25 years.

    The US probably had a higher tax burden in the 1950's and 1960's than France does today, and we also had strong economic growth.
    As with most of your posts, you are correct on the factual framework ( for the most part ) but you leave out a few things.

    Actually Hoover started the dramatic increases in Federal spending after the Stock Market crashed in October , 1929. But he also signed Smoot- Hawley and dramatically raised tax rates. I think the top marginal rate under Hoover rose to 65 %. The economy was actually starting to heal in 1932 until the Fed completely dropped the ball by raising rates and failing to bail out a major bank which started a nationwide bank panic.

    FDR's "alphabet soup " did raise Federal spending in his first term but there was not a dramatic improvement in the economy. It improved somewhat but at a much slower rate and more sluggish pace than other "post-panic" recoveries. In his second term he did cut spending and he raised taxes. He did both when he should have done NEITHER ! It was NOT all FDR's fault because while he was behaving foolishly on the Fiscal side, the Fed screwed up ( AGAIN ! ) when they raised interest rates. All three TOGETHER caused the Great Recession of 1938.

    You are mostly correct about post- W.W. II growth. There WAS incredible pent-up demand resulting from such things as Americans were unable to buy a new car from 1942 to 1945 ; or new tires ; Or major appliances etc. etc. What you ignore is the fact that we had no serious industrial competition for about 20 years or so after W.W. II. Add in things like building the Interstate Highway System ; a lot of new airports ; LOTS of new houses together with accompanying schools , stores, roads etc. ( i.e. SUBURBIA ! ) ; a growing T.V. and electrical appliance industry plus a healthy defense budget ( it was a much bigger share of the Federal budget and national GDP then, than it it was in the 80's or is now ) and we had a strong, growing and healthy economy. No doubt.
    We also had four major recessions : one under Truman and three under Eisenhower.

    Nobody, least of all me , is saying that China has not boomed over the last 30 years or so. They have. But unlike us after W.W.II their success has not been as widespread. The growth of their middle class lags well behind the post W.W.II growth in ours. Their boom is generated mostly by internal infrastructure and industrialization and much less on the consumer side.

    One last word about tax RATES. Yes, we have had a top M A R G I N A L tax RATE of as high as 91 %. Nobody paid 91 % of their total income in taxes. NOBODY. Thanks to all the credits, exemptions and deductions the effective tax rate was actually much lower and that is before we look at all the legal tax avoidance such a rate encouraged.

    I have repeatedly said that I want the super-rich of the U.S. to pay MORE in taxes . I've advocated that we collect MORE revenue from them. Just futzing with tax rates has been an historically poor way to do that. In the 1950's the average CEO made anywhere from 10 to 20 times what the average worker at their company was being paid. Today it is usually hundreds and perhaps even thousands of times more. Certainly among the Fortune 500. I am on record questioning whether that is healthy. I've repeatedly said that we ought to change our Tax Code to reward entrepreneurship and innovation and not reward simple greed. You don't necessarily do that by just raising rates. I want to rip out all the crony capitalism from both the Tax Code and the Federal Budget.
    Last edited by Eric Stoner; 01-18-2013 at 08:00 AM.

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