Friday, August 13, 2010

The death of Keynesian theory


(click to enlarge)

This wonderful piece of satire comes from an enlightened client report from Sprott Asset Management (HT: Zero Hedge).

9 comments:

Public Library said...

Read it. Love it.

Benjamin said...

Must have died from over-use, during the Reagan-Bush-Bush jr. era.

Reagan ran deficits up to 6 percent of GDP.

The Lantern said...

I don't think many people follow Old Keynsianism, but it seems like many (most?) economists on either side of the political spectrum subscribe to New Keynsianism (Greg Mankiw, John Taylor, Christina Romer, etc). Mankiw's macro textbook is now the norm in business schools. I think they recognize a role for both countercyclical monetary and fiscal policy (particularly when coordinated). I think they are warier of government spending multipliers than old Keynsians.

I really don't think politicians in general have economic philosophies, or if they do they ignore them.

Paul said...

"Reagan ran deficits up to 6 percent of GDP."

And Obama is doubling that. Yet you told me you'd still grade him with a C. I guess Reagan, who at least presided over an economic boom, at least gets at least a B in your grade book.

Right?

Benjamin said...

Paul-

I guess I would give Reagan a "B-" or "C+"

Despite the efforts of modern-day Reagan hagiographers to buff his image, in fact Reagan ran deficits all through his terms, and edged out Carter appointee and Fed Chief Volcker to bring in the easy-money Greenspan.

In fact, Reaganomics was part Keynesian, and it worked (though I am sure Grannis would add that tax cuts are better than spending, and Reagan was a tax-cutter).

Reagan did boost military outlays, but then he faced the Soviet Union, which had two million men in uniform, a blue-water navy, ICBM missiles, and supersonic bombers and fighter-jets. In some ways the Soviets military technology was superior to ours, and they developed a torpedo capable of hundreds of knots per hour (called a supercavitating torpedo).

Today we face a few punk terrorists hiding in the hills of Punkcrapistan, but our level of military spending actually exceeds the Cold War era!!!

Obama has not pointed out this horrendous waste of taxpayer money, this huge siphoning of money out of the jobs-creating private sector--indeed he abides by it--so Obama gets a lower grade the Reagan.

BTW, you should read up on Senator Taft of Ohio, as Republican and conservative as they come. He stalwartly blocked US entry in WWII, until Japan and Germany declared war on us first. There was a time when the Republican Party was deeply dubious about foreign entanglements--this current wave of Republican militarists and occupationistas is a new thing.

Paul said...

"Despite the efforts of modern-day Reagan hagiographers to buff his image, in fact Reagan ran deficits all through his terms."

I suggest you actually read David Stockman's book "The Triumph of Politics." It's been about 20 years since I did, but I remember his complaints about trying and failing to get Congress to agree to enough budget cuts.

"He stalwartly blocked US entry in WWII, until Japan and Germany declared war on us first."

And this is actually a positive, in your book?

Benjamin said...

Paul-
Evidently, Stcokman has changed his mind, and now says the R-Party shoudl declare bankruptcy. He recent;y penned this piece for the NY Times. It is a complete refudiation of the modern-day R-Party.

On WWII, some say we should have entered earlier. My point is the R-Party has gone from being very conservative in undertaking foreign entanglements, to today's militarists and occupationistas.

We are in the ninth year of occupying Afcrapistan,and Max Boot and other far-right extremists are we should get ready for a long war that may never feel like victory.

Gee, I thought nine years was long. Boot, btw, now is paid as a consultant by the Pentagon. I guess if I was on retainer, I would support the war too. There is a large R-Party base of military contractors and districts with defense establishments--classic public agency lardbutt-buildup.

I would prefer sensible balance.

John said...

Benj & Paul,

In pre WW2 America I believe the 'liberal' party was the Republicans and the 'conservative' party was the Democrats. The repubs were highly isolationist. I believe Joseph Kennedy (JFK's father) was the US ambassador to Britain in the late 1930s and I believe was a republican. He was the political opposite of Winston Churchill and supported (to FDR's chagrin) PM Chamberlain's acceptance of Hitler's piece by piece absorption of Austria and Czechoslavakia into greater Germany. FDR hated it, but accepted it because America was neutral and there was no other actionable option.

The two parties in those days were the spectrum opposites of today. In fact, Ronald Reagan was a democrat in his early years and often said something like "I didn't leave the democratic party, it left me."

GraySailor said...

I don't remember that much about Keynesian theories from my college economics (50 years ago;) but, I think re. budgets and spending, he proposed a balance in the long run favoring deficits in bad times and surpulses in good. Seems to me the reality is that our legislators are quick to employ the former and slow on the latter. Or, is it non-existent on the latter? Why bash Keynes when we rarely, if ever, followed the whole approach.

Governments (ours) are created to serve the people, evolve to serve themselves, and have to be beaten into submission before they again serve the People.