Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: Keynesian

The Modern German Economic Model is a Myth – revised and updated

Dessau, a small and steadily shrinking town in the German state of Saxony-Anhalt in what used to be East Germany, is doing the best it can. Ten years after the fall of the Berlin Wall the anticipated “miracle” enjoyed by West Germany following World War II failed to materialize for Dessau and so it is in the process of demolishing some 10,000 empty homes and

Keep Reading…

The Modern German Economic Model is a Myth

Dessau, a small and steadily shrinking town in the German state of Saxony-Anhalt in what used to be East Germany, is doing the best it can. Ten years after the fall of the Berlin Wall the anticipated “miracle” enjoyed by West Germany following World War II failed to materialize for Dessau and so it is in the process of

Keep Reading…

Britain enters third recession in four years

You would think that politicians and central bankers would learn from their mistakes, wouldn’t you? They would learn that if something doesn’t work then try something else (or try doing nothing, instead!). But no, despite warnings from Moody’s (I wrote about their downgrade of Great Britain on Monday here), which is simply a rear-view mirror of what’s already happened and their very late recognition of their faltering economy, they continue to

Keep Reading…

Those sequester cuts are really going to hurt. Not.

Leave it to my favorite establishment mouthpiece to put things into perspective: according to the Washington Post those sequester cuts starting March 1st are really going to hurt, pushing the economy into another recession (another?) and costing

Keep Reading…

Another discussion about minimum wage laws?

Obama’s demand that the minimum wage be raised to $9 an hour triggered an avalanche of commentary on the issue, including this from the Associated Press:

President Barack Obama says raising the minimum wage to $9 an hour and tying future increases to inflation will

Keep Reading…

If the Fed has created so much new money, where is the inflation?

Frank Shostak, a scholar at the Mises Institute, asks the same question: where is the price inflation that is supposed to follow the creation of new money? Shostak asks it far more eloquently than I:

Keep Reading…

A Tea Party House member doesn’t think there will be a fiscal cliff deal

Tim Huelskamp is a House member (R-Ky.) and a member of the Tea Party Caucus who was canned by Speaker John Boehner because he didn’t “toe” the Republican line, a move that Huelskamp called “petty” and “vindictive.” I called it “instructive” about Boehner.

He has strong opinions about government spending, and wasn’t afraid to voice them. Back in February of this year,

Keep Reading…

Latest Move by the Federal Reserve Raises Important Questions

With Federal Reserve Chairman Ben Bernanke’s latest announcement of a new bond-buying program linked to unemployment data instead of the calendar, commentators called it an “historic move,” “another innovation,” and a “surprise” that amounts to a “complete reversal” from the Fed’s days of using Fedspeak to disguise and obfuscate its moves.

After reviewing how the economy looks from the Fed’s point of view, Bernanke announced that his Federal Open Market Committee (FOMC) will

Keep Reading…

Fed’s announcement changes its words, not its actions

It’s hard for me to keep a civil tongue when chief alchemist Ben Bernanke makes an announcement like this. He’s going to buy more government securities in order to lower the unemployment rate, but this won’t affect the inflation rate. If it does, he’ll stop.

For the first time, the Fed has announced a goal for the unemployment rate. By saying that it anticipates that it will keep interest rates extremely low until the unemployment rate falls to 6.5% (as long as inflation doesn’t get out of control), the Fed has become more aggressive about turning the economy around.

It bears repeating:

Keep Reading…

Keynesians are Crazy! Here’s Proof:

English: Japanese Prime Minister Shinzo Abe at...

Japanese Prime Minister Shinzo Abe at the G8 summit in Heiligendamm. (Photo credit: Wikipedia)

For 20 years the Japanese economy has languished. Its stock market, once at 40,000, now is below 10,000. The solution? More of the same medicine that hasn’t worked! It’s insane. At least one intelligent soul has written about it, in The New York Times no less. He calls such policies “unusual”:

For years, proponents of aggressive monetary policy have offered this unusual piece of advice as a way to end Japan’s deflationary slump and invigorate the economy. Print lots of money, they said. Keep interest rates at zero. Convince the market that Japan will allow inflation for a while.

It hasn’t worked. For 20 years it hasn’t worked. So now, Japan’s former prime minister has a great idea:

In a speech in Tokyo on Thursday, Mr. [Shinzo] Abe said he would call for the Bank of Japan to set an inflation target of 2 to 3 percent, far above its current goal of about 1 percent, with an explicit commitment to “unlimited monetary easing” — an open-endedness that has caused jitters among some economists. The bank’s benchmark interest rate should be brought back to zero percent from 0.1 percent, Mr. Abe added.

Abe wants to do even more. He proposes that Japan’s central bank buy construction bonds to

Keep Reading…

Keynesian Economists Nervous About Fiscal Cliff

DAVOS/SWITZERLAND, 25JAN07 - Maria Bartiromo, ...

Maria Bartiromo, Anchor, CNBC’s Closing Bell, and Host and Managing Editor, Wall Street Journal Report, CNBC, USA; (Photo credit: Wikipedia)

Maria Bartiromo is the majorette domo of television investment broadcasting. She is also a Keynesian. From her bio:

She is a member of the Board of Directors of the Young Global Leaders of the World Economic Forum, a member of the Council on Foreign Relations [and] the Economic Club of New York… (my emphasis)

Bartiromo graduated from New York University, where she studied journalism and economics.

Rest assured good friends that NYU doesn’t teach Austrian School economics. And membership in the CFR guarantees that anything she says or writes will be the elite Anglo-American establishment’s view.

And she is getting nervous about the fiscal cliff:

The ongoing fight over the “fiscal cliff” may overshadow everything else as we get closer to the new year. Sadly, compromise seems hard to come by, even though the consequences of going over the cliff — hundreds of billions of dollars of spending programs that are set to expire, along with the largest tax increase since World War II for virtually all income levels — was specifically designed to force compromise.

Obama has dug in his heels: no deal unless

Keep Reading…

What’s to Blame for the Slow Economic Recovery?

Obama: Jesus would back my tax-the-rich policy

(Photo credit: porchlife)

What’s remarkable in this article is not what is said (with which I agree ) but who is saying it: Jerry Dwyer used to work at the Federal Reserve Bank of Atlanta, while James Lothian used to work at Citibank/Citicorp. These are Keynesian guys who have worked in the belly of the beast, and yet have seen the light!

The economic recovery is historically very slow:

Our current recovery has been the weakest since at least World War II.  Thirty-nine months since the recovery started in June 2009, job growth has been  only 2 percent. During the average recovery since 1970, job growth over the  first 39 months has averaged over 8 percent. The current recovery has failed to  keep up with the growth in the working age population. Unlike past recoveries,  much of the drop in the unemployment rate simply reflects people giving up  looking for work. And there is no doubt there was a financial crisis.

But blaming it on the financial crisis is merely political cover for the Obama administration to assume unto itself more powers and excuses to use them, all in the name of

Keep Reading…

Taxmageddon Only Part of the Problem

Explosion

Explosion (Photo credit: Freidwall)

The Heritage Foundation went to the trouble of calculating exactly what will happen to the tax liabilities of taxpayers if Taxmageddon stays in place after the first of the year. Accordingly to Amy Payne, “Taxmageddon” is the

horrifying combination of expiring pro-growth tax policies from 2001 and 2003, the end of the once-temporary payroll tax cut, and just a few of Obamacare’s 18 new tax hikes…

Taxmageddon will be the largest tax increase EVER to hit Americans. It’s nearly $500 billion in one year, starting January 1. That’s two months away.

Here is Heritage’s breakdown of Taxmageddon’s impact on Americans:

  • Families with an average income of $70,662: tax increase of $4,138
  • Baby boomers with an average income of $95,099: tax increase of   $4,223
  • Low-income workers with an average income of $24,757: tax increase of $1,207
  • Millennials with an average income of $23,917: tax increase of $1,099
  • Retirees with an average income of $42,553: tax increase of $857

But even this fails to measure the real impact of Taxmageddon starting January 1. It’s that most of the tax increases will be borne by s

Keep Reading…

Is Hurricane Sandy Good for the Economy?

Broken Window Fallacy

Broken Window Fallacy (Photo credit: KAZVorpal)

It didn’t take long for some ignoramus (as usual, a college professor) to explain one-half of the broken window fallacy concerning the economic impact of Hurricane Sandy: it’s going to be good! All good! Yes!

Here’s the story line from this fellow:

Disasters can give an ailing construction sector a boost, while unleashing reinvestment that actually improves stricken areas and the lives of residents. Ultimately, Americans always seem to emerge stronger and rebuild better in the wake of disaster.

Happily and predictably, my friend (I don’t know him, but I know his thinking, with which I agree) Donald Boudreaux jumped onto the article with a letter to the editor pointing out the

Keep Reading…

Tax Cuts for the Rich or Tax Relief?

English: The Subsidised Mineowner - Poor Begga...

(Photo credit: Wikipedia)

It’s all about how you frame the question, isn’t it? The issue appears to be tax cuts for the rich: should we or shouldn’t we? By framing the question that way, discussion is limited. By re-framing the question, it changes the answers. Thanks to Investors Business Daily for pointing this out.

President Obama warned that GOP hopeful Mitt Romney’s proposed income-tax  cuts will “cost” the government revenue and repeat Bush policies that he says  blew up the deficit.

“The centerpiece of his economic plan are tax cuts,” Obama said at Tuesday’s  presidential debate in New York. “That’s what took us from surplus to deficit.”

The mantra from the Obama camp is annoyingly repetitive and consistently wrong:

The Obama camp has strenuously opposed Romney’s pro-growth strategy, arguing  that tax breaks, especially for the wealthy, “rob” programs for the middle class  and poor because they don’t raise revenues and don’t “pay for themselves.”

“It has never been done before,” Vice President Joe Biden insisted in last week’s debate with Romney running-mate Paul Ryan.

But history has shown that when entrepreneurs are allowed “relief” – to keep more of what they earn – they earn more. What a surprise!

The historical tables in the back of the latest “Economic Report of the  President” show that the Bush tax cuts generated more, not less, federal  revenues — a phenomenon that also held true for Presidents Clinton, Reagan and  Kennedy.

All four leaders, two Republicans and two Democrats, slashed taxes for top  individual earners or investors. And once these rate reductions took effect and  began stimulating economic activity, record individual income-tax receipts  poured into the U.S. Treasury.
A great example is what happened when President Kennedy, against the advice of his Keynesian advisors, cut tax rates on

Keep Reading…

The Second Presidential Debate: Duel of the Dunces

made in china

made in china (Photo credit: mandiberg)

I didn’t watch the second presidential debate between Mitt Romney and Obama. I had something more important to do: ironing pillowcases and doing some laundry.

But my friend (I’ve never met him but I like him) Donald Boudreaux did. And he just had to write a letter to The Wall Street Journal to vent:

Yesterday’s presidential debate further exposed Messrs. Obama’s and Romney’s economic illiteracy (“China a Punching Bag in U.S. Presidential Debate,” Oct. 17).

Each man insists that America’s economy can be harmed by inexpensive imports – in other words, harmed by opportunities for voluntary exchanges that lower Americans’ cost of living.

He starts with Romney:

By promising to raise taxes on Americans who buy Chinese-made goods, Mr. Romney again promised to break his campaign promise to not raise taxes.  That he is unaware of the contradiction isn’t promising.

I must interject here: Romney is following the advice of

Keep Reading…

Is QE3 a Myth?

English: President Barack Obama confers with F...

President Barack Obama confers with Federal Reserve Chairman Ben Bernanke following their meeting at the White House. (Photo credit: Wikipedia)

Graham Summers, writing for ZeroHedge, has pointed out that Fed head Ben Bernanke hasn’t done any new buying of securities despite his promise to do so back in September. The Fed publishes its balance sheet. You can see it here, in graphical form. As Summers said, if Bernanke was buying, how come the measure of money – the adjusted monetary base – is declining?

Would Bernanke lie? Oh, no!

The stock market jumped up nicely at the news, but has retraced most of those paper gains. Maybe the market has figured it out: it was

Keep Reading…

Is China Going Austrian?

Zhang Weiying - Annual Meeting of the New Cham...

Zhang Weiying – Annual Meeting of the New Champions 2011 (Photo credit: World Economic Forum)

In a remarkable article in the Wall Street Journal, the increasing influence of Austrian school thinking in communist China is exposed. It revolves around the efforts of a single individual, Zhang Weiying, the founder of the China Center for Economic Research at Peking University.

This is a mind-altering experience, reading this article. It puts my pre-existing perceptions and prejudices into disarray. When the Chinese government committed an astounding $3.5 trillion – half of the country’s gross domestic product – to stimulate the economy in 2008, it expected great things to happen: it would put people to work, counteract the Great Recession then enveloping the US, and show just how wonderful a state-controlled economy could be.

It didn’t work. Says the Journal:

Ultimately, Beijing’s stimulus fed a false investment boom that stoked asset bubbles – then the morphine [yes! the writer actually said morphine!] wore off while the government tightened.

Officials claim the economy grew at 7.6%…between April and June…Skeptics think the real number is closer to 4%. (One London research house says 1%).

Meanwhile, industries dominated or favored by the state, such as steel or solar power [No!], are idling from overcapacity. Countless sheets of copper are reportedly stacking in warehouses, blocking doorways and exemplifying Hayek’s notion of malinvestment.

Zhang somehow escaped the state indoctrination of Keynesianism and started thinking on his own. His influence has grown so remarkably, and the economic disaster enveloping China now becoming so obvious – there are now

Keep Reading…

National Review Doesn’t Speak For Me

Arthur C. Brooks – Why the Stimulus Failed

Ask most Americans about the big-spending government policies of the last few years, and they will tell you the programs have failed. In a February 2012 poll from the nonpartisan Pew Research Center, 66 percent of Americans said the federal government is having a negative impact on the way things are going in this country (versus 22 percent who say the impact is positive). A majority disapproves of the president’s 2009 stimulus, and according to a 2010 CNN poll, about three-quarters of Americans believe the money was mostly wasted.

National Review Covers Jan-Jun 2008

National Review Covers Jan-Jun 2008 (Photo credit: AlaskanLibrarian)

This, I agree with. I’m glad to see, according to the polls at least, that more and more Americans also agree: government stimuli didn’t stimulate.

What I disagree with is Brooks’ contention buried later on in the article about conservatives (I generally consider myself one, if defined properly) and safety nets:

Conservatives today understand the importance of a reliable safety net for the truly indigent and the necessity of dealing with certain market failures.

Further, there is universal support on the political right for opportunity-equalizing government policies, such as publicly funded education (ideally, administered for the benefit of children as opposed to rent-seeking bureaucrats and teachers’ unions).

Wow! I didn’t realize that I believed in and supported all these things! But this is National Review, the supposedly “conservative” voice of reason in today’s world.

The most reliable safety net in the world is…are you ready…the family. That’s why socialists the world over consider the family as the enemy of the state: everyone must be dependent on the state or else their socialist plans fail.

And “universal support” for “publicly funded education?” All I see is that the more that is spent by governments on such education is lower scores and more acceptance of big government on the part of the kids.

So somewhere along the way I got off the bus on “conservatism,” at least the style supported by National Review.

A Former Fed Official Goes Rogue

CATO – The Fed’s New Round of Quantitative Easing

By introducing another program to buy MBSs [mortgage-backed securities], to the tune of $40 billion per month, the FOMC [Federal Open Market Committee, headed by Fed Chairman Bernanke] is supporting the long-standing federal policy of special aid to housing, real estate and mortgage interests.

These federal policies were the largest single contributor to the financial crisis. Why would the Federal Reserve want to encourage continuation of these federal policies?

Modern-day meeting of the Federal Open Market ...

Modern-day meeting of the Federal Open Market Committee at the Eccles Building, Washington, D.C. (Photo credit: Wikipedia)

My, my, the landscape does look a little different from the outside, doesn’t it, Mr. Poole?

He is about my age. He attended Swarthmore (I attended Cornell) and received a BA degree in 1959 (I got mine in 1963). He got his MBA from the University of Chicago in 1963 (I got mine in 1964, also from Cornell), and then went on to get his PhD in economics at the University of Chicago. (I didn’t. I went to work in the private sector.)

He started his career in government by working for the Federal Reserve’s Board of Governors from 1964 to 1974. Then he joined the faculty at Brown University, chairing the economics department there.

Fast forward: in 1998 he served as CEO of the Federal Reserve Bank of St. Louis, and left in 2008, and now is a Senior Fellow at Cato(!).

Somewhere along the way he got religion. I have great respect for Cato and they wouldn’t hire a fool. Nor would they bring in a Keynesian to undermine their efforts to expose that fraud unless he was an escapee from the reservation.

But listen to what Poole said:

The Federal Reserve says that it is apolitical but this decision is directly supportive of continuation of the current status of Fannie Mae and Freddie Mac. This action is not monetary policy but fiscal policy, extending credit to a favored industry. This policy is crony capitalism, whether practiced by the federal government or by the Federal Reserve.

This is perfect: “crony capitalism” – “extending credit to a favored industry” – “not monetary policy but fiscal policy.” Amazing!

My questions for Mr. Poole: how long did it take you to overcome your Keynesian mindset and enter the real world? Are you a “recovering Keynesian?” Are you just an opportunist? When and how did you see the light? Is there hope for others still on the reservation?

I’d sure like to know.

Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.