The Keynesians Get Their Wish

The American Thinker ^ | November 06, 2010 | Peter Raymond

[Scanian]

The Keynesians finally got their wish. The Federal Reserve plans to inject $600 billion dollars of the most caustic debt imaginable into the economy. This is the Agent Orange of monetary policies that has the potential to wreak financial havoc.

In the hope of generating inflation, the central bank is going to enable deficit spending by buying treasury bonds. You read that correctly; the primary goal is to erode the value of the dollar, and we get to watch our currency and wealth literally dissolve before our eyes.

Only a desperate government would consider debasing its own currency. The resulting inflation will be an insidious tax on every American who will suffer as wages lag behind increasing prices. It is doubtful countries like China will react favorably to the precipitous drop in the value of the debt owed to them.

This strategy of monetary sabotage will punish savers and creditors, but Keynesians simply will not tolerate anything that impedes deficit spending. Since deflation hamstrings spending, they will stop at nothing to reverse deflationary pressures.

Despite the misinformation propagated by these big spending liberals, deflation has existed during extraordinary periods of economic growth and did not adversely affect consumers or wage earners. In fact, deflation is not only a common occurrence in a free economy, it is indicative of a vibrant and healthy economic expansion where innovations and efficiency that competition engenders lower the costs of production. These lower costs translate into lower product prices benefitting the consumer.

Consumers were not harmed by the significant deflation of personal computers prices over the last two decades and despite these falling prices there has been explosive growth and profits. No credible economist could argue consumers, manufacturers, or the economy would have been better served if the government intervened and forced computer prices higher. Yet Keynesians propose our economic woes can be ended by forcing the price of all products higher.

And in spite of the fact the government intrusion in the market was the root cause of the mortgage crisis; Keynesians continue to affirm that capitalism and central planning can co-exist. This is patently false. You can either have a centrally planned economy or a free economy, but not both.

[4rcane]

Will paul krugman complain that the stimilus is not big enough? What the hell is this? Before long QE2 will become QE3. It will become $2trillion before long.

[fortheDeclaration]

We will have yet another ‘bust’ coming.

[exnavy]

When the crash comes, we little people can be thankful for not being in politics.

[AZLiberty]

The real shame of it is that they're printing up $600B and giving it to the government -- the Obama government.

We would have been better off if they had printed up $600B in $100 bills and dropped it from airplanes across America. Of course, that's a lot of $100 bills. But it certainly would have got the economy going.

[Berlin_Freeper]

Obama is making his move.

[Outlaw Woman]

Yes he is and the fact that not a soul is trying to stop him shows how rotten the government is. I cannot believe that this is occurring without so much as a fight from anyone.

[coon2000]

I think there is a lot of tinder laying around. One small spark is all it is going to take.

[Cobra64]

I think there is a lot of tinder laying around. One small spark is all it is going to take

Hopefully sooner than later. Better buy more ammo.

Anyway, I just sent this article to a few dozen people, including some liberals.

[The Duke]

Maybe I should start invoicing my customers for ounces of gold, or maybe Mexican pesos? How stable is the peso?

[Adder]

Consumers were not harmed by the significant deflation of personal computers prices over the last two decades and despite these falling prices there has been explosive growth and profits.

A small quibble: many of those savings came from shipping production overseas.

[BfloGuy]

We would have been better off if they had printed up $600B in $100 bills and dropped it from airplanes across America. Of course, that's a lot of $100 bills. But it certainly would have got the economy going.

I realize you're not completely serious, but it would not get the economy going to give citizens $600 billion in counterfeit dollars. There would be a serious burst of economic activity -- accompanied by an even more serious burst of price increases as the new dollars diluted the old.

A bust would follow quickly as the total purchasing power of our money settled back to where it had been.

Sending this new money through the government will simply drag out the process. The results -- inflation and bust -- will follow just the same.

[BfloGuy]

One more thing:

When the amount of currency in circulation is substantially greater than the value of tangible goods produced (and saved from prior years), then the value of the currency must drop. In the end, we are still trading goods for goods -- money just makes the process more convenient.

The Keynesians understand all that but they believe that goosing the money supply does more good than harm. But sound money is the foundation of every successful society. That mainstream economics is able to deny that is beyond unbelievable and extremely frustrating.

I'm not one for victimology, but we truly are the victims of this vicious scheme which can only help the politicians and the corporations which will get their hands on the money while it's still worth something.

Obama's legacy has been cast in stone by this latest Fed action no matter what he does from here on out. It probably bodes well for the next election, but, unfortunately, we'll all have to live through the mess.

Sorry for the sermon, but the government's debasing the currency should, in my opinion, become our "single issue" for 2012. If we can't support ourselves, nothing else will matter.

[phockthis]

It didn't work in the "30's" and it won't work now... Henry Morgenthau, Jr. (IPA: /ˈmɔrgənθɔː/; May 11, 1891 – February 6, 1967) was Secretary of the Treasury of the United States during the administration of Franklin D. Roosevelt. He was also the father of Robert M. Morgenthau, the current District Attorney of New York County. New Deal In 1933, Roosevelt became President and appointed Morgenthau governor of the Federal Farm Board. In 1934, when William H. Woodin resigned because of ill-health, Roosevelt appointed Morgenthau Secretary of the Treasury (an act that enraged conservatives). Morgenthau was an orthodox economist who opposed Keynesian economics and disapproved of some elements of Roosevelt's New Deal. Although he was a Roosevelt loyalist and retained his office until 1945, in "New Deal or Raw Deal?" Burton Folsom quotes Morgenthau, testifying before the House Ways and Means Committee in May of 1939, the FDR ally did not sugarcoat it: "We are spending more money than we have ever spent before and it does not work. I want to see this country prosperous. I want to see people get a job. We have never made good on our promises. I say after eight years of this administration we have just as much unemployment as when we started and an enormous debt to boot." Henry Morgenthau, Jr. - Wikipedia, the free encyclopedia http://en.wikipedia.org/wiki/Henry_Morgenthau,_Jr.

[PGalt]

When the crash comes, we little people can be thankful for not being in politics.

Or connected to the FED, or AIG, or the banksters, or etc., etc. the rest of those plundering the USA.

It is impossible to introduce into society a greater change and a greater evil than this: the conversion of the law into an instrument of plunder. - Frederic Bastiat 1801-1850

[sheana]

To put that $600 bil in perspective......
http://www.newyorkfed.org/aboutthefed/fedpoint/fed01.html

[AZLiberty]

Totally agreed. The long term consequences of either approach are sad. If the goal, however, was to “stimulate” the economy (rather than enrich and empower the Ruling Class), it would have been more efficient to distribute the money directly.

There’s a saying in the systems community, abbreviated by POSIWID: The purpose of a system is what it does. Forget about what anyone says the purpose is; watch what it actually does.

[coon2000]

These guys make a fine product.

http://georgia-arms.com/search.aspx?find=g223bcAN

[Cobra64]

I’ve done a lot of business with them. Mostly .223 Remington, but I load all my own 9mm and .45 Auto range ammo.

[algernonpj]

...I'm not one for victimology, but we truly are the victims of this vicious scheme which can only help the politicians and the corporations which will get their hands on the money while it's still worth something.

If you don't already know, the Fed is right out of Marx's Communist Manifesto:

"The proletariat will use its political supremacy to wrest, by degree, all capital from the bourgeoisie, to centralize all instruments of production in the hands of the state, i.e., of the proletariat organized as the ruling class; and to increase the total productive forces as rapidly as possible.

Of course, in the beginning, this cannot be effected except by means of despotic inroads on the rights of property, and on the conditions of bourgeois production; by means of measures, therefore, which appear economically insufficient and untenable, but which, in the course of the movement, outstrip themselves, necessitate further inroads upon the old social order, and are unavoidable as a means of entirely revolutionizing the mode of production. ... "

Measure No 5 of 10 to achieve the above in advanced nations =

"5. Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly."

Manifesto of the Communist Party by Karl Marx and Frederick Engels

We have been living under crony capitalism / corporatism / fascism which is marxism with the illusion of freedom and private ownership.