John Maynard Keynes is responsible for all that is about to happen to the world

[TonyT]

The trouble with people is that they confuse marginal supply and demand with shifts in the supply and demand curves.

Take this sentence, from the Austrian Mises Institute: "The additional savings must be used to create more capital. As Hayek explains, initially, more production comes at the expense of less consumption."  (http://mises.org/daily/2804)

What's wrong with this sentence?  Nothing--during normal times.  This marginal analysis is correct then (if one goes up, the other must come down).  When the economy is at its maximum potential, indeed more production comes at the expense of less consumption.  But when there is an output gap, like today, you can actually have both more production and more consumption at the same time, as Keynes points out.  You can have your cake and eat it too.  This is because resources are just sitting around, and people are not consuming, out of fear.  If you prime the pump with some easy money, the economy goes back to its maximum potential --this is shown graphically in Econ 101 textbooks as a shift in the supply and/or demand curves-- and then (and only then) do you get the marginal relationship that Hayek is describing.

Of course figuring out when an economy is at its maximum potential and when it is not is a big issue.  Today's "liberals", like NY Times economist and Nobel Prize winner Paul Krugman, argue the US economy is less than full maximum potential, while "conservative" economists argue the opposite, that today's output gap is a result of structural changes that have been going on for years but only became apparent, suddenly, like the fabled straw that broke the camel's back, in 2008.  So, argue these conservative economists, the US economy is already at its full potential today.  Easy money will not make for more production and consumption, say these conservative economists, but may in fact do bad things like cause inflation or just add to the burgeoning national debt.

[twiifm]

Keynes is not about printing money.  Hes all about stimulus.

Friedman is about printing money. 

Dude learn this 101 level stuff before you post

+1

Also, there is a bit of a difference in Government borrowing (in order to stimulate demand and create employment through public sector investment in for eg. infrastructure) and TBTF commercial banks operating in a deregulated market creating debt and cheap money to the masses.

These kind of arguments, whereby unemployment is caused by regulation (in what to all intents and purposes is a deregulated/"liberalised" labour market) and where credit crunches are also caused by regulation (in what to all intents and purposes is a deregulated (ineffectual regulation) banking sector) - well, it just doesn't ring true.

   Its like the man who crashes his car blaming it on the mandatory road tax he has to pay - and not the bottle of vodka he downed before setting off on his journey.

Keynes advocates artificially lowering interest rates, there is no way to do this without having the banks print more money.

The Fed can just lower the rate with a keystroke.  Why would banks have to print more? Only Central Bank can print money.

QE was first done by Japanese.  Idea from Werner but wholly supported by Friedman.  QE isn't Keynesian

[Robert Paulson]

Keynes is not about printing money.  Hes all about stimulus.

Friedman is about printing money. 

Dude learn this 101 level stuff before you post

+1

Also, there is a bit of a difference in Government borrowing (in order to stimulate demand and create employment through public sector investment in for eg. infrastructure) and TBTF commercial banks operating in a deregulated market creating debt and cheap money to the masses.

These kind of arguments, whereby unemployment is caused by regulation (in what to all intents and purposes is a deregulated/"liberalised" labour market) and where credit crunches are also caused by regulation (in what to all intents and purposes is a deregulated (ineffectual regulation) banking sector) - well, it just doesn't ring true.

   Its like the man who crashes his car blaming it on the mandatory road tax he has to pay - and not the bottle of vodka he downed before setting off on his journey.

Keynes advocates artificially lowering interest rates, there is no way to do this without having the banks print more money.

The Fed can just lower the rate with a keystroke.  Why would banks have to print more? Only Central Bank can print money.

QE was first done by Japanese.  Idea from Werner but wholly supported by Friedman.  QE isn't Keynesian

the banks would have to print more because an artificially low interest rate will cause the demand for loans to outstrip supply and the banks will eventually run out of money to loan unless they print more.
commercial banks can print money, 99% of the fiat money in existence was created by the commercial banks using fractional reserve lending.
Keynes was the first one to propagate these bullshit ideas about "stimulating" the economy using both fiscal and monetary policy, without him the Chicago school bullshit monetary expansions wouldn't exist either.

[twiifm]

Keynes is not about printing money.  Hes all about stimulus.

Friedman is about printing money. 

Dude learn this 101 level stuff before you post

+1

Also, there is a bit of a difference in Government borrowing (in order to stimulate demand and create employment through public sector investment in for eg. infrastructure) and TBTF commercial banks operating in a deregulated market creating debt and cheap money to the masses.

These kind of arguments, whereby unemployment is caused by regulation (in what to all intents and purposes is a deregulated/"liberalised" labour market) and where credit crunches are also caused by regulation (in what to all intents and purposes is a deregulated (ineffectual regulation) banking sector) - well, it just doesn't ring true.

   Its like the man who crashes his car blaming it on the mandatory road tax he has to pay - and not the bottle of vodka he downed before setting off on his journey.

Keynes advocates artificially lowering interest rates, there is no way to do this without having the banks print more money.

The Fed can just lower the rate with a keystroke.  Why would banks have to print more? Only Central Bank can print money.

QE was first done by Japanese.  Idea from Werner but wholly supported by Friedman.  QE isn't Keynesian

the banks would have to print more because an artificially low interest rate will cause the demand for loans to outstrip supply and the banks will eventually run out of money to loan unless they print more.
commercial banks can print money, 99% of the fiat money in existence was created by the commercial banks using fractional reserve lending.
Keynes was the first one to propagate these bullshit ideas about "stimulating" the economy using both fiscal and monetary policy, without him the Chicago school bullshit monetary expansions wouldn't exist either.

What on earth are you talking about?  Banks can create credit.  But thats not printing money.  That's a balance sheet operation. 

Keynes didn't invent FRB and credit money has been around forever

[StudyEconomics]

You are delusional as hell if you think any other policies could save capitalism anyway. We are headed towards structural unemployment due automatization of  labour, and this is unstopable. You should study a bit more before being this simplistic. "Its just Keynes..."

https://www.youtube.com/watch?v=7Pq-S557XQU

automatization of labor has been happening since the industrial revolution and has brought our western standard of living to unmatched historic levels.

whats happening now is squarely the fault of keynseian malinvestments and the corruption of the monetary system.

it was free market capitalism that propelled the west into prosperity and socialism that burried china and russia.

now the socialistic cancer has infected the west in a disguise of keynsian capitalism.

You Austrians think too much.  In fact, J.M. Keynes (much as I hate him) was a genius.  He correctly saw several things. First, if you are an Austrian, he foresaw AD (Aggregate Demand) is a viable concept (feel free to disagree, but nearly nobody who is not an Austrian agrees with you).  Second, he saw that Say's Law does not work (ditto).  Third, he saw that in the economy of the 1930s (and true even today), where unions existed and monopoly power exists, that wages and prices are "sticky", hence, with most people, you can fool them by "printing more money" (they confuse nominal prices with real prices, due to sticky wages and prices).

For all of the above Keynes deserves praise.  That said, I am a gold bug and hard money advocate and I hate what he's done to modern economies (perpetual debts, savers are shafted in favor of debtors, and currency is debased every year).  But he's still a genius, much more than say Murray Rothbard of the Austrian school.

So your a traditional monetarist? Care to elaborate.

[STT]

Snazzy video there but the most useful thing about Keynes and feature most liked by politicians is that he is long dead.     The last record of him of any great note is his very great disagreement with the dollar being the reserve currency, does that really sound like he would approve of Washington ruling the world now like it does.

Of course he cant argue and his books are open to interpretation but I prefer to actually take what he said while living, Im fairly sure if he was alive he'd quickly die again of shock at our sheer stupidity.  Keynes advocated a surplus not just continual deficit, when did US federal gov last reduce national debt; it never will until failures already current are apparent and force change

[StudyEconomics]

Snazzy video there but the most useful thing about Keynes and feature most liked by politicians is that he is long dead.     The last record of him of any great note is his very great disagreement with the dollar being the reserve currency, does that really sound like he would approve of Washington ruling the world now like it does.

Of course he cant argue and his books are open to interpretation but I prefer to actually take what he said while living, Im fairly sure if he was alive he'd quickly die again of shock at our sheer stupidity.  Keynes advocated a surplus not just continual deficit, when did US federal gov last reduce national debt; it never will until failures already current are apparent and force change

They don't need to "pay off" debt, just need to make sure that revenues grow faster than expenses.

[STT]

Sure Im not stating absolutes but to run deficits always like they have, I dont believe Keynes did advocate government actions of this nature.     The main danger now is with excess, so such large debts, such extreme interest rates, the amount of QE and the degree to which fiscal expenditure makes up gdp.    All of these dials are in the red, they dont have to do anything at all but it seems likely with so many extremes that consequences or 'rebalance' will be hard to mitigate.  

  The argument always seems to be, government can do whatever they wish to set forth, set rates low, never pay debt off, increase spending as they desire or see best fit to do so but 1 central body dictating is not the case in democracy or in capitalism, if we are facing other possibilities beyond that it has already become very much not a story of success

[aljunking]

So who is that John Maynard guy? 

[TonyT]

So your a traditional monetarist? Care to elaborate.

What is a 'traditional monetarist'?  A follower of Milt Friedman?  To me, Friedman and Keynes were closely joined at the hip, with the former leaning towards a IS–LM model with monetary policy doing the work on shifting IS and the latter leaning towards an AD-AS model with fiscal policy doing the work on shifting AD.

Both models IMO are flawed, as they assume you can move the market.  In practice neither the Fed nor the Treasury have much long term power to move the market.  This btw is heresy amongst professional economists.

See more here on what I am talking about, in case you know very little about economics despite your moniker :-):

http://en.wikipedia.org/wiki/IS%E2%80%93LM_model

http://en.wikipedia.org/wiki/AD%E2%80%93AS_model

My view:

http://en.wikipedia.org/wiki/Treasury_view

In macroeconomics, particularly in the history of economic thought, the Treasury view is the assertion that fiscal policy has no effect on the total amount of economic activity and unemployment, even during times of economic recession. This view was most famously advanced in the 1930s (during the Great Depression) by the staff of the British Chancellor of the Exchequer. The position can be characterized as:[citation needed]

    Any increase in government spending necessarily crowds out an equal amount of private spending or investment, and thus has no net impact on economic activity.

In his 1929 budget speech, Winston Churchill explained, "The orthodox Treasury view ... is that when the Government borrows in the money market it becomes a new competitor with industry and engrosses to itself resources which would otherwise have been employed by private enterprise, and in the process raises the rent of money to all who have need of it." 

Keynesian economists reject this view, and often use the term "Treasury view" when criticizing this and related arguments. The term is sometimes conflated with the related position that fiscal stimulus has negligible impact on economic activity, a view that is not incompatible with mainstream macroeconomic theory.

[STT]

So who is that John Maynard guy?  

Pretty controversial, many competing recipes

What is a 'traditional monetarist'?

Capitalism is the capital worth of an economy distributed among its participants not controlled by a central body.   Not equal worth distribution, but certainly not QE, probably not fixed interest rates and I would argue, no central banks with exclusive license in a free capitalist society.   That would be traditional, we're a long way from that.   The positive about bankruptcy is that bad ideas die, we may have a while to wait


IMF article -

Relevant still
Still, the monetarist interpretation of the Great Depression was not entirely forgotten. In a speech during a celebration of Milton Friedman’s 90th birthday in late 2002, then-Fed governor Ben S. Bernanke, who would become chairman four years later, said, “I would like to say to Milton and Anna [Schwartz]: Regarding the Great Depression, you’re right. We [the Fed] did it. We’re very sorry. But thanks to you, we won’t do it again.” Fed Chairman Bernanke mentioned the work of Friedman and Schwartz in his decision to lower interest rates and increase money supply to stimulate the economy during the global recession that began in 2007 in the United States. Prominent monetarists (including Schwartz) argued that the Fed stimulus would lead to extremely high inflation. Instead, velocity dropped sharply and deflation is seen as a much more serious risk.­

Although most economists today reject the slavish attention to money growth that is at the heart of monetarist analysis, some important tenets of monetarism have found their way into modern nonmonetarist analysis, muddying the distinction between monetarism and Keynesianism that seemed so clear three decades ago. Probably the most important is that inflation cannot continue indefinitely without increases in the money supply, and controlling it should be a primary, if not the only, responsibility of the central bank.­

http://www.imf.org/external/pubs/ft/fandd/2014/03/basics.htm

[Mccoy818]

So who is that John Maynard guy? 

Why not use the whole thread dude?

[romjpn]

Keynes is not responsible. It is more likely Hayek. The theories of Hayek were adopted just after the 1929 crisis in Germany. The results were simple : no deficits but a rising unemployment and deflation. Because the government just let the economy free. We know what happened after.
All the crisis are consequences of free market. Because the market is unstable, there is no "invisible hand" ruling it, it's a crowd of humans doing business, diving into bubbles, then the bubbles pop etc. Think about Kondratiev and Schumpeter.
If you accept pure free capitalism, you also accept many collateral damages, such as extreme inequality (born in a rich family or a poor one), no stability (bubbles, crisis). The auto-regulation of the economy is brutal and violent.
I'm interested about BTC because I'm a programmer. But I'm not a libertarian like 90% of the Bitcoiners. I don't believe in a pure free market, because the power is then possessed by those who have the more money.
Printing money is artificial and can't be a long term solution, I agree with that though.

[abrahamlitcoin]

So who is that John Maynard guy? 

You can google it if you want to know who he is.

[Adrian-x]

his bullshit theories about money printing and deficit spending give governments the academic justification they need to manipulate the money markets.
not only are his ideas responsible for all the economic misery the west is having for the last 40 years but he has infected Japan and China too,
there is not a single country today that is not on the disaster recipe of paper money/central bank manipulated interest rates.

the world is collectively heading towards financial suicide as the west continues to cannibalize the capital it has accumulated during its 170 years of more or less real money capitalism and free markets.
may the odds be at your favor for what is about to unfold in the coming years...

Actually John Maynard Keynes's ideas failed in the 1980 (just prior to the Thatcher and Reagan administrations.)

the person responsible for this mess is Milton Friedman, hes the one who said Keynes was wrong but implemented a macro economic control system that is now in the hands of elites. He believed one can manage everything through the central bank and by manipulating the money supply.

he said "We are all Keynesians now" after integrating Hayek's economic theory with Keynes's.

Keynes had the goal of setting up public private interests in a free market to create equality, he failed as the public got the better deal, Friedman reversed that and the 0.01 got the better deal.

here is a great video https://www.youtube.com/watch?v=fXqc-yyoVKg 5 min.  

[Adrian-x]

So who is that John Maynard guy? 

highly recommend watching this series:

Masters Of Money │ Episode 1 │ John Maynard Keynes Documentary
https://www.youtube.com/watch?v=niNYQtU8GkY

Masters Of Money │ Episode 2 │ Friedrich Hayek Documentary
https://www.youtube.com/watch?v=HEiCN57XhiI

Masters Of Money │ Episode 3 |Karl Marx BBC
https://www.youtube.com/watch?v=zvAf2gOvaiY

[Robert Paulson]

while i agree Milton Friedman shares much of the blame, Keynes is the first one to have opened the door for all the other theories that seek to implement a control economy disguised as a free market.

he was the first one to give the excuse governments needed to intervene in the labor markets, without him no one would have listened to Milton Friedman's money printing nonsense.
without those people we would probably still be on a gold standard and none of the 00 and 07 bubbles would have happened, families would still only need one worker instead of having both parents working and still barely making ends meet.

[Adrian-x]

It was the failing of the gold standard and 2 world wars that paved the way for Keynes.

It is only now with bitcoin we have a better system, if we start using it like gold to back other currencies we're doomed to make the same mistakes.

Bitcoin will be the new currency if we use it as such it's backed by people who use it. Lots of political pressure to use it as a blockchain not the currency, so who knows.

I don't blame Keynes had he understood the situation today I bet he'd be swinging closer to Bitcoin than the IMF.

[Robert Paulson]

I don't blame Keynes had he understood the situation today I bet he'd be swinging closer to Bitcoin than the IMF.

unfortunately the road to hell is paved with good intentions.

[Adrian-x]

I don't blame Keynes had he understood the situation today I bet he'd be swinging closer to Bitcoin than the IMF.

unfortunately the road to hell is paved with good intentions.

sure, but what other options were there back then, we didn't have Bitcoin.
Bitcoins future isn't even secured yet there are those who believe inflation is good, and are trying to mold bitcoin to fit with the inflation model of national currencies by adjusting to protocol, and there seems to be a lot of support for it.