Keynesian Economics is the Real Voodoo

Life is largely about pattern recognition. If you touch a hot stove and get burned every time you do so, eventually you will stop touching that stove. Even many animals are capable of learning on this level, so why aren’t politicians?

If you boil it down, the two most drawn out economic “recoveries” in our nation’s history are the ones where the federal government has been most actively and visibly involved. These being the Great Depression and what we have been living through the past six years. In both we saw slow employment growth over many years which leave a lot to be desired (part-time and discouraged workers anyone?). In both we saw lackluster GDP growth. And in both we saw massive expansions of the federal government.

John Maynard Keynes would blush at what has been done during the Obama Administration to spur economic activity. Interest rates don’t exist, the Fed has been buying bonds endlessly, and the Congress and the President have set records for deficit spending. The day President Obama took office the total U.S. debt was sitting at $10.6 trillion. We are now at roughly $18.35 trillion in total debt. That’s just under $8 trillion of deficit spending during this recovery and approaching a 100% increase in debt in just one administration. In other words, we are coming close to adding as much to the debt in eight years as all other years in the history of the nation combined.

When is enough enough? When is Keynesian economics not valid? How many more times must these ideas be tried and fail spectacularly? In 1987, when the stock market crashed President Reagan did nothing. And guess what? Things got better and quick. Just years earlier President Reagan and Paul Volcker responded to the threat of stagflation by giving the finger to the economic leftists. Interest rates were raised sharply, and taxes were cut. Instead of growing spending, Reagan felt it would be better to reduce the amount the government takes in, effectively reducing the role the political class has in allocating the country’s resources. Why did that work out so much better?

Most importantly, take the lessons learned from the Great Depression, as explained by economist Thomas Sowell:

 

 

This isn’t rocket science.

The policies which have led to inflated stock and bond market these past few years are disgusting in the sense they enrich the rich and ignore the needs of the poor. But nonetheless watch as “experts” get on television and explain what the government “should do” in response to this stock market crisis.

Nothing.

More from The Liberty Standard

Leave a Reply

Your email address will not be published. Required fields are marked *