The G20 leaders recently called upon the leaders of the developed nations to employ more massive amounts of debt financed government spending to ward off the current economic stagnation and in some instances the early stages of recession. That fits Einstein’s definition of insanity: “doing the same thing over and over again but expecting a different result”. The pursuit of so-called “macroeconomic (fiscal and monetary) policies” has produced a quarter century of economic stagnation in Japan, a $30 trillion debt bubble in China with little to show, and stagnation and looming recession in Europe and increasingly in the US.
Einstein was a genius who remains relevant today. Just within the last few weeks evidence was reported of gravitational waves predicted by Einstein almost a century ago. Proving Einstein’s theories has been the focus of physics during the past century, but he maintained that had he been able to get an academic appointment instead of a position at the Swiss patent office he never would have been able to develop and publish his new path-breaking theories.
In his recently released biography The Courage to Act
Adam Smith, Scottish moral philosopher and political scientist in the Department of Political Economy at Glasgow University, is considered to have fathered modern economics in 1776 with the publication of The Wealth of Nations
Once mathematical models were assumed to accurately explain economies, they could be used not only for prediction but to change the future, presumably for the better, by encouraging political intervention in the present. The father of this discipline, famed British economist John Maynard Keynes, before he died almost three quarters of a century ago provided quotes to fit many situations including the present:
“The difficulty lies not so much in developing new ideas as in escaping from old ones.”
“The ideas of economists and political philosophers, both when they are right and when they are wrong are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.”
Keynes might well have agreed that the current global economy managed in his name is insane. If there was a flaw in his genius, it was in believing that he could manipulate politicians to his ever changing will, but the reality was quite the opposite:
“I work for a Government I despise for ends I think criminal.”
The macroeconomics profession (of which I was once a part) self-selects the delusional. They must first delude themselves that politicians are “policymakers” in pursuit of the public interest – in contradistinction to microeconomists who assume people (of which politicians remain a subset) pursue their own rational self-interest, historically a sufficiently accurate conclusion. Some macroeconomists “advise” on “fiscal” tax, expenditure and regulatory policies, to little effect other than providing political scapegoats for “unintended consequences”. Those who choose monetary policy have more power due to the Federal Reserve’s historic pretense of political independence, and Fed employment is the ultimate destination for the truly delusional.
The Fed’s original purported mission was to prevent inflation: total cumulative inflation in the century before the Fed was about 7%, and after was about 2300%. Their second de facto mission was to mitigate systemic financial sector failure, which arguably didn’t occur in the pre-Fed century but not coincidently has repeatedly occurred since, most recently with the bursting of the sub-prime lending bubble and globally systemic financial system collapse of 2008. Since 1978 the Fed’s mandate has included promoting full employment, to no good effect.
The Fed’s self financing (it effectively “prints” the money to fund itself) has allowed it to delude itself and the public regarding its performance. It has generally accommodated politicians wanting to avoid accountability for crony capitalist policies that mostly redistribute income regressively, then bails out the victims – “moral hazard” be damned to some distant future. In more market oriented economies the least malignant manifestation of this lack of accountability is in distorting reality by massaging or changing the statistics (from the Greek word for “state”) by which its performance is measured. But the long run consequences of activist central bank management of the economy are best illustrated by the extremes of bureaucratic economic management.
As first described in Hayek’s Road to Serfdom
The Soviet Union was extremely successful economically from the perspective of US macroeconomists when it unexpectedly failed systemically in 1989, because its GDP was growing and unemployment was only about 1%. But GDP measures total expenditures, not value, and about 60% of the labor force was producing goods for which the final market value was less than the value of the non-labor inputs. Politicians promote full rather than productive – employment because an idle workforce threatens the political status quo, but systemic economic failure is the inevitable end result of chronic macroeconomic money printing and political spending. War against real and perceived external enemies is the ultimate political full employment tool.
The increasing size and power of government, particularly the US federal government, reflects the political proclivity toward crony capitalism and “rent seeking”. To increase his political base, former President Bill Clinton extended the rent seeking political elite beyond those directly employed, funded or protected by government to community action groups, diverting capital to millions of homebuyers that couldn’t otherwise afford it, resulting in the sub-prime lending debacle. Democratic candidate Bernie Sanders correctly attacks his rival Hillary Clinton as a crony capitalist, but has a bad sense of direction, attacking Wall Street rather than Pennsylvania Avenue. The democratic constituency is now mostly composed of a barbell political elite that excludes the middle class.
Of the 17 initial declared Republican candidates, there are essentially three remaining: The two anti-establishment Tea Party candidates, Cruz and Rubio, previously opposed by Republican “political elites”, and Donald Trump, historically a Democrat that the Republican establishment thought would have long since faded away. Cruz started as a Constitutionally limited small government libertarian, but subsequently dropped the antiwar part of the platform in competition with the consistently hawkish Rubio. Trump appeals to those currently working in the private sector, i.e., not part of the political elite (to which he belongs): they expect him to shout the politically incorrect phrase “you’re fired” at current elites.
That requires extraordinary power, but:
“Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men.”
All modern Presidents and Federal Reserve Chairmen (and ladies) aspire to greatness. Hence the electorate’s dilemma.
—-
Kevin Villani
Author of Occupy Pennsylvania Avenue
Kevin – The cosmological constant whether or not it was a “mistake” has nothing to do with Planck’s constant or quantum physics. You are extremally confused.
” Their second de facto mission was to mitigate systemic financial sector failure, which arguably didn’t occur in the pre-Fed century”
I disagree. There had been a series of “Panics” over the previous century and the Panic of 1907, which was probably related as much to the 1906 earthquake as to the purported causes, led to its adoption. The Fed, of course, became the plaything of various leaders, one of whom, Ben Strong, had the effrontery to die just before the failure of his program of low interest rates.
Keynes, in fairness to him, never seemed to understand that putting the power to spend money in the hands of politicians was like giving lethal weapons to children. There was no chance that they would follow his precept to run surpluses in times of prosperity to soak up the money spent in bad times.
My opinion of Economics is posted here.
Decades ago I met a few ancients who could remember Keynes: “Maynard” they called him. More than 30 years after his death they were still in awe of how clever he had been, and that was against a background of their Cambridge that had been packed with wonderful physicists.
Yet Mike is right: he handed the monkeys the keys to the gun store.
The pre-Fed panics were made worse in no small part by government manipulation of the banking system. The National Bank Acts passed to finance the Civil War created a de facto national currency which drove out local bank notes, hard money, and local control of currency. The solution was to double down on a centralized stranglehold of the economy and create the Fed.
“The solution was to double down on a centralized stranglehold of the economy and create the Fed.”
Yes, the Fed had a big hand in the Depression which was deeper than the previous ones. Even The Panic of 1873 lasted only six years. The Great Depression lasted ten.
The Panic of 1873 and the subsequent depression had several underlying causes, of which economic historians debate the relative importance. Post-Civil War inflation, rampant speculative investments (overwhelmingly in railroads), a large trade deficit, ripples from economic dislocation in Europe resulting from the Franco-Prussian War (1870–71), property losses in the Chicago (1871) and Boston (1872) fires, and other factors put a massive strain on bank reserves, which plummeted in New York City during September and October 1873 from US$50 million to $17 million.
The Railroad panics were similar to the South Sea Bubble.
The American Civil War was followed by a boom in railroad construction. 33,000 miles (53,000 km) of new track were laid across the country between 1868 and 1873.[3] Much of the craze in railroad investment was driven by government land grants and subsidies to the railroads.[4] At that time, the railroad industry was the nation’s largest employer outside of agriculture, and it involved large amounts of money and risk. A large infusion of cash from speculators caused abnormal growth in the industry as well as overbuilding of docks, factories and ancillary facilities. At the same time, too much capital was involved in projects offering no immediate or early returns.
And
The decision of the German Empire to cease minting silver thaler coins in 1871, caused a drop in demand and downward pressure on the value of silver; this had a knock-on effect in the USA, where much of the supply was then mined.
This led to bi-metalism as a political issue and Bryan’s “ Cross of Gold speech.”
The most famous speech in American political history was delivered by William Jennings Bryan on July 9, 1896, at the Democratic National Convention in Chicago. The issue was whether to endorse the free coinage of silver at a ratio of silver to gold of 16 to 1. (This inflationary measure would have increased the amount of money in circulation and aided cash-poor and debt-burdened farmers.)
Rubio anti-Establishment? You gotta be kidding and you refuted your own claim indirectly.
The Establishment….. Anglo-zionist/imperialist…has been Israelophilic and Russophobic to the point of war for past decades.
Trump is regarded a most unreliable loose cannon in both theaters.
“The Establishment”¦.. Anglo-zionist/imperialist”¦has been Israelophilic and Russophobic to the point of war for past decades.”
Conspiracy theories again. Bush I was anti-Israel and so was Baker. GW Bush was pro-Israel but Clinton was phobic and Obama is hostile.
The GOP Establishment has been mildly anti-Israel and the Democrats hostile since Carter.
“Trump is regarded a most unreliable loose cannon in both theaters.”
No, there is only the evidence that his daughter is a Jewish convert.
What is known is that Netanyahu is very conservative and has put Israel on a conservative course after a half century of Socialism.
He may have hurt Romney by endorsing him.
Oh, please. Obama replenished the Iron Dome with US taxpayer largesse and refused pleas of Palestinians to at least temporarily cut off aid until Israel’s Gaza’s barbaric attack was quelled. In fact Obama refused to even criticise Israel at a time
when many European leaders were.
Israel has essential a war socialist economy funded by the US taxpayer. I understand the Israeli libertarian party wants US aid cut off so Israel can make its war decisions apart from the wishes of Schumer and Boxer.
Yes, that was sarcasm.
I’ll tell you what “anti-Israel” is. It’s not the scolding wrist slapping then apologizing rather than cutting off aid of Baker and father Bush.
It’s the actions of Chavez, the Swedish prime minister who was killed, Hafez Assad, James Forrestal etc.
Rubio anti-Establishment? You gotta be kidding
It’s a reasonable characterization. Rubio was the Tea Party favorite for FL Senator, the anti-establishment choice. His subsequent participation in the Democrats’ immigration deal soured many of his erstwhile fans on him. And since Jeb dropped out Rubio is the least anti-establishment candidate in the race. However, he hasn’t changed much. What happened was that Republican primary voters moved to the Right on immigration and other issues, the Republican establishment shifted support to Rubio, and Trump changed the standards by which many voters evaluate candidates.
I read recently somewhere that the Tea Party membership polled as 47% still believing the Iraq War was worth fighting.
If you can check this out, and find it or something similar is a reliable stat, it certainly disqualifies the Tea Party as being
“anti-Establishment” in any meaningful way.
Sorry if I don’t define Establishment in a manner useful to some in the Establishment.
The Establishment”¦.. Anglo-zionist/imperialist”¦has been Israelophilic and Russophobic to the point of war for past decades.
Indeed, and for good reason. Both the imperial Russians, the communist Russians, as well as the muslims, are and were expansionist, totalitarian societies. The USA and the Anglosphere in general have opposed the expansion and the forceful imposition of those ideologies on others against their will. I hope we continue to do so.
Cruz also supported giving Obama a free hand to betray the American worker in the TPP.
Again, Establishment.
Expansionist Israel did not even exist before 1948, before it stole the land from the indigents. Many there still dream of Ereztz
Israel and while liars like you continue distorting geopolitical reality, Obama still goes on allowing Israel to build more and more settlements expanding and stealing more land.
Nothing has been as expansionist revolutionary and culture-destroying as Washington and New York’s imperialist globalist capitalism since the end of WW2.
Ken Hoop:
“I read recently somewhere that the Tea Party membership polled as 47% still believing the Iraq War was worth fighting.”
They’re among the Americans who understand that on the facts, the decision for OIF was correct on the law and justified on the policy.
Answer to “Why did Bush leave the ‘containment’ (status quo)?”;
Answer to “Did Iraq failing its compliance test justify the regime change?”;
Answer to “Was Operation Iraqi Freedom a strategic blunder or a strategic victory?”.
Didn’t the Republican party support Christ? (did I spell it right) who changed parties when he lost?
I find the arguments of some that Trump is the true conservative an insight into their core definition of “conservative:”it doesn’t appear to be free market, nor traditional Burkean (traditions, etc. property) conservative nor religious conservative nor even the conservative style we see in the exemplary lives of honor of our great heroes (say Washington & Lincoln) nor the respect we have for the bourgeois quiet values of a man who worked his way up, with dignity and self-respect, sometimes failing but keeping his self-respect until he became a success in an open society. It appears not conservative in thought or action and if it is in feeling, it is a reflexive rather than reasoned conservatism. It may have some bits of Ayn Randism and its emphasis on the self (but surely this is a delusion – does he want an audience of individualists or an audience that thinks he’s an individual, that thinks that they partake of some of his individualism (others might call narcissism) by joining his audiences that roar at the most vulgar of observations. And it sure as hell doesn’t seem to be any form of philosophical conservatism.
At this point my respect for Rush Limbaugh has increased, and I think Sasse is someone to listen to. Trump’s at the place where he appears to have promises and threats he may become able to use to influence others. Watch those not seduced or frightened.
Others are party people – if Trump is displaced, all those democrats he appears to be drawing in are not going to vote, nor are a lot of disguntled Republicans. The party has to be true to its own laws. I can see it is quicksand everywhere and I don’t see a way out. But that doesn’t mean I don’t think we should try looking for one. Cruz isn’t charming and Rubio isn’t even winning on that level; perhaps it is all over. But my how this whirlwind has swept us all into this vortex.
And some that are for him fear a debacle with Hillary winning enough to make them hold their noses as they vote for Trump. Well, yes, I, too, will probably do that. But I’m not going to be happy doing it, nor, unless he changes his stripes entirely and unless he is modest but sensible about using power, will I feel much loyalty to a party that put him in power.
Expansionist Israel did not even exist before 1948, before it stole the land from the indigents.
And as soon as the Moslem expansionist conquerers return the Mediterranean littoral to Western, Christian civilization and apologize, I’ll worry about Israel.
Before 1948 the Land of Israel was occupied by foreign invaders for centuries. Despite the leftist pro-Arab propoganda, there were many Jews who still lived there continously including throughout the Middle Ages. Zionism, the movement to restore a Jewish homeland, went back almost a thousand years before Israeli independence, such as with the poet Halevi who returned to Israel in the 12th century.
Kevin, thanks for writing this, I really enjoyed it. I agree there’s a tiny problem with the Plank’s constant thing, but that’s a trivial detail compared to your larger points, which is the Political Economy is not driven by animal spirits – or if it is, they’re evil spirits for sure – but by venal, self interested human beings, with their own interests front and center. The damage done to the lives of millions of people by these powerful few is incalculable.
Solutions?
Close the Fed.
Proceed with bankruptcy settlements on the existing debt.
Pass a balanced budget amendment.
Reform the federal civil service rules, bringing them into line with standard labor practices. The federal government is not a lifetime tap into the taxpayers pockets.
Burn the tax code, start over from scratch.
Require every administrative regulation to be accompanied by a cost/benefit analysis. Require each regulation to be voted up or down, individually.
Ginny,
You are correct. The Republican establishment supported the unprincipled “moderate” Charlie Crist. Rubio was the conservative insurgent and long shot.
It’s easy to forget how far we have come politically since 2008. There are many more principled conservatives, including Cruz, in Congress and state legislatures now.
No one knows how all of this turns out, but it seems to me unwise to write off this country just yet.
Ignore the trolls.
“Israel’s Gaza’s barbaric attack was quelled.”
Nice to see your agenda in one phrase. In poker they refer to that as a “Tell.”
I find the arguments of some that Trump is the true conservative an insight into their core definition of “conservative:”it doesn’t appear to be free market, . . .
We can explore the issue by using the question “What is being conserved.” If Rubio is a conservative, then when is he trying to conserve?” Similarly, we can ask “What did Bush conserve about America?” and also “What have Republicans conserved in America over the last 20 years?”
We can perform thought experiments to explore the ramifications of this question. For instance, if we could magically switch every single person living in America with those living in Nigeria, Congo and neighboring countries, would the new residents of America be American because they now existed in a land where the Constitution was theirs, where the laws and the courts were theirs, where the parks and roads and airports and radio stations and move studios were theirs.
If politicians seek to conserve low capital gains taxes, free trade treaties which disproportionately enrich those with capital to invest, conserve military spending, conserve freedom of the seas so that transit can proceed unimpeded, while simultaneously working to erase the people, the values and the culture of the people who’ve inhabit America and whose families have long histories in America, then it can be argued that these folks are not really conserving much in America but are plundering America in order to enrich a select class.
Rubio is no way, no how, a conservative, not with his schemes to legalize 30 million illegals and to boost legal immigration levels by 3x.
Others are party people – if Trump is displaced, all those democrats he appears to be drawing in are not going to vote, nor are a lot of disguntled Republicans. The party has to be true to its own laws.
Philosophy clubs exist to keep alive a particular philosophy. Political parties exist in order to capture the reigns of government. In order to capture control of government in our system, the simplified model is that the party must represent the interests of 50.1% of the voters. Purity is for virgins. The purists who are now having crying jags because they’re poised to lose control of the party are an impediment to winning elections. The party platform of the Republicans at the national level is a disaster when measured against the popular vote received in support of such positions.
I find the arguments of some that Trump is the true conservative an insight into their core definition of “conservative:”it doesn’t appear to be free market, . . .
Let’s play a game. Most people have some internal limit as to how high they want to see the Muslim proportion of the population grow. If 90% of the people around them were immigrants from Afghanistan, Pakistan, Iraq, Yemen, Syria, people would say “This isn’t America anymore.” We can backtrack from the 90% down to 70%. No cheating via “white flight”, so is 70% of your immediate neighbors, co-workers, people in the street, all Muslim, good for you and still allow you to feel that you’re in America?
What’s you limit?
If you play along and express a limit, please explain how you plan to enforce that limit when that percent who are Muslim in America has the same rights as you.
Secondly, do you believe that you will have an easier time in enforcing a limit when the Muslim proportion is higher or lower? Do you see the imposition of a limit as a measure designed to conserve America?
If your conceptualization of America is full religious freedom then you have no logical basis to claim that an America which is 90% Muslim, filled to the brim with immigrants from Iraq and Yemen and Saudi Arabia is no longer American.
The person who could most benefit from thinking through these issues is Paul Ryan who claims that a ban on Muslim immigration is “Not who we are.”
I think that an America which is 90% Yemeni-American-Muslim is no longer America. If I want to conserve America, then I need to address the issue of being blind to religion, and culture and race for that matter, when it comes to immigration and who gets to call themselves American. If I’m already at this point, then I need to address the issue of whether it’s easier to address thee issues when Muslims are 50% of the population or 2% of the population. A lot that should be conserved about America is lost when America becomes 50% Muslim, so a conservative should appreciate measures designed to reduce Muslim immigration and keep the population at 2% because such measures conserve America, as reflected by it’s people, history, values, and culture.
The Constitution is not supposed to be a cultural suicide pact.
I don’t think Trump is conservative. I think he is a populist. If we are lucky, he will resemble William Jennings Bryan, although not as much a pacifist. If we are unlucky, he will resemble Mussolini.
If the GOPe succeeds in denying him the nomination, we will probably see a president Clinton again. I don’t see the Trump voters voting for Romney, or whoever the GOPe comes up with. I voted for Romney in 2012 with enthusiasm. More enthusiasm than any Republican I have voted for.
He lost.
We are in a different world.
Yeah, the Romney who still defends the Iraq War.
http://www.theamericanconservative.com/larison/trump-and-the-republican-open-letter-on-foreign-policy/
Sorry, losers. The bulk of the GOP Euro-American working middle has had it with wars for Israel, for Haliburton (see Rand Paul on Cheney’s motivations) with
job outsourcing and with runaway financialism/corruption. They identify more with Putin than with Merkl–as does the German working/middle who say
“Merkl to Siberia, Putin to Berlin.” And they want their entitlements, that’s European state conservatism, but you can call it populism if you wish.
Funny, when the Kochs bought off the Tea Party it went from demanding prison for the banksters to the narrow ‘small government’ agenda and let OWS take
the filed with the more apropos concern.
The working middle is against “Invade the world, invite the world” and those of you here that oppose only the second half of it deserve to lose your nation.
You love the Evil Empire more.
Ken, your Putin propaganda is so transparent as to be laughable. Merkel is an old-time East German commie, a cynical, calculating, one-woman wrecking crew to European civilization and a sneaky lying old marxist to boot. Therefore, very much like your employer ‘Vlad the Impaler’ Putin. I’m sure they get along splendidly.
Your understanding of the world would fit in thimble, and even that is distorted by your ingrained marxist-lennist-communist-atheist outlook. Your influence is zero and, speaking for myself only, I see you as no more than a wannabe assistant village idiot. But thank you for your useless input. So pour another shot of vodka and toast your dictator. Russia is only ever stable when some criminal thug has you by the throat.
http://www.thetower.org/3039-how-israel-developed-the-worlds-most-advanced-missile-defense-system/
The liars on this site are unequalled anywhere. Like the ones who say Obama was opposed to Israel while he was funding this aide of oppression.
“Yeah, the Romney who still defends the Iraq War.”
A lot of those people on that list supported the Iraq War and still want to send more troops there, although some didn’t.
Niall Ferguson didn’t. He’s one of the few on that list I would take any advice from.
Here’s a weird one – Lester Munson is a sports writer. I’m not sure what he’s doing on that list. That’s got to be a typo.
If you read closely their grievances such as this one:
His vision of American influence and power in the world is wildly inconsistent and unmoored in principle. He swings from isolationism to military adventurism within the space of one sentence.
there doesn’t seem to be any anti-war sentiment. They’re basically just complaining about Trump’s style, which is really very petty for people who claim expertise on the subject. We just had the ‘Words Matter’ president and it was a disaster.
Trump is a wild care kind of emblematic of the US.
Trump is no Buchanan who is no Le Pen (Jean Marie or Marine.)
As for Merkl, her anger then sweeping under the rug /placation of the German public of the US spying on her shows whose side she’s on, and it’s not Putin’s.
She is under the influence of the globalist/capitalist/multiculturalist US on her immigration policy as well. If Stalin had swept to the Atlantic
Western Europe would have more solidarity today than under Yank occupation—and the Western Euro “far right” pro-Russ parties realize that now–globalist capitalism being
far more revolutionary than Stalinesque military socialism.
Trump….”wild card.”