Sunday, December 18, 2011

More Keynesian Cheerleading from Henry Blodget

Here's the latest from Keynesian cheerleader Henry Blodget:
After the experience of the past five years, it certainly seems like John Maynard Keynes was right, doesn't it? 
It seems hard to conclude anything else.

I'm not an economist, and I'm not born of a particular economic school that I've bet my life's work on, so I have observed the global economic events of the past five years with a fairly open mind.

I've listened to Keynesians like Paul Krugman argue that the way to fix the mess is to open the government spending spigot and invest like crazy.

And I've listened to Austerians like Niall Ferguson argue that the way to fix the mess is to cut spending radically, balance government budgets, and unleash the private sector.

And I've also looked back at history--namely, Reinhart and Rogoff's analysis of prior financial crises, the Great Depression, Japan, Germany after Weimar, and so forth.

And I have to say, the conclusion I keep coming back to is that Keynes was right.
What Blodget should be doing is dropping the "e" from Austerians. An austerity program is a program designed by the political elite to tax a country into suffocation via economic hit men. It is not an economic school of thought. There is however an Austrian school of economic thought which has a fully developed, well thought out, understanding of economics. It was the Austrians who warned about the real estate crash and have the only fully developed business cycle theory that explains why both the boom and bust occur when government manipulates the money supply.

So Blodget may be opened minded, but if he considers "Austerian" as an economic school of thought and doesn't even mention the school of thought, the Austrian school, that has a fully developed business cycle theory, he sadly has only an uninformed, very pedestrian understanding of economics. It can't possibly result in his being able to develop critical conclusions, open mind, or not.

Furthermore, his cheerleading for massive government spending fails to take into account that government spending requires money be taken from others, through taxation, borrowing or inflation. This means there is less money in the private sector. In other words, it's just a damn transfer of wealth from users who are efficient producers to users, the government, who are bureaucratically inefficient, aren't driven by profit and loss, and who are driven to reward those who benefit them politically.

It is simply bizarre for Blodget to continue to advocate this Keynesian transfer of wealth, when he on a personal level is very careful with his own wealth and wouldn't for a minute employ his own wealth in the fashion that government bureaucratic agencies treat taxpayer funds.

My challenge to Blodget remains:

Henry, please allow me to sift through the government bureaucracy and find ten commonly used rules, regulations or techniques that government uses and allow me to impose them on your business, Business Insider.  If you are so much in favor of giving taxpayer money to the government that operates under these central planning bureaucratic rules, than you must see some benefit to operating this way, and let's employ these rules on your business.


  1. "This means there is less money in the private sector"

    Bob, I would be careful in how you state the above. The reason why I say this is that many MMTers and Keynesians would say that there is no crowding out. In a monetary sense I would have to agree with them, because there is no limitations to the creation of new money in a purely fiat environment. However, there is crowding out in terms of resources in which the monetary unit can purchase. Also, they tend to completely disregard the effects of their policies on calculation and the allocation of resources. To Keynesians money is entirely neutral, but to the MMTer, money is merely an accounting unit; both do not account for scarcity.

    I must credit both Bob Roddis and Jonathan Catalan for making this ever more clear to me.

  2. "...invest like crazy" I hear there's huge demand for hole diggers which is forecasted to be followed by a huge demand for hole fillers. Some economists are even concerned we could be creating a hole bubble.

    @Fetz - "...MMTers and Keynesians would say that there is no crowding out." Sure, just a lot of stealing. "To Keynesians money is entirely neutral..." which is why they've always been useful idiots to the political class.