Yes, Keynes warned the world about the Treaty of Versailles. The reparations payments led to a bankrupt German economy, which Keynes predicted. Keynes also made a lot of money in currency speculation. He also advocated that government debt be paid back, during the boom period of the economic cycle. Instead governments just keep increasing their debt loads.
Don`t get me wrong, I do not support current so-called Keynesian policies. I am a fan of the Austrian school of economics. However, you have to admit, Keynes was one of the giants in his field.
Which shows how anti-Keynes the current "finance spending by debasing currency" approach is.
(BTW, I seriously doubt that any of the current day "Keynesians" read and absorbed JMK's General Theory. Plus, empirical evidence is hard against Keynesian economics -- no derision quotes here, I do mean the economics of JMK.)
Even as originally conceived (with surpluses during a boom), Keynesianism wouldn't work, because it fails to understand what the business cycle really is and why recessions are a necessary part of it. Like forest fires, they clear out the deadwood that accumulated during the last boom, freeing up resources for new businesses to flourish.
Since the 1980s we've had neither a real recession nor a real recovery, just ever more easy money to prop up malinvestments that should have been liquidated long ago.
Yup, Keynes warned that the punishments put onto Germany would create an atmosphere ripe for radical politics and likely lead to a second world war. Very amazing how prescient he turned out to be.
As a side note, don't anyone fall for the belief that acceptance of fiscal stimulus is the norm in modern macroeconomics. Google John Cochrane's article, "Fiscal Stimulus RIP"
In my college econ class (30 years ago), my prof pointed out that keynes said that you could manipulate the economy IN THE SHORT TERM, but in the long term, you always had to pay it back (with interest)
I have never read Keynes, except the review of his major works by Henry Hazlitt, so any discussion of Keynesian theory that I engage in predicates Hazlitt having done a proper job. Given the effort he went to to keep Keynes' own words, I think he did a good job. So I will say this. Keynes believed that banks and the government could literally create wealth out of thin air by printing money. He believed (or rather advocated) that union-pushed wage rates could NEVER be responsible for a recession or depression. He believed that deliberate inflationary policy, as in currency debasement, was the proper means of solving the problem he refused to address, that is economic inefficiencies caused by labor union wages. And he had tremendous suspicion and scorn for both businessmen in particular and for the entire capitalist system in general.
So, Keynes was in reality a crypto-Marxist, not a capitalist.
Yes, Keynes warned the world about the Treaty of Versailles. The reparations payments led to a bankrupt German economy, which Keynes predicted.
ReplyDeleteKeynes also made a lot of money in currency speculation.
He also advocated that government debt be paid back, during the boom period of the economic cycle. Instead governments just keep increasing their debt loads.
Don`t get me wrong, I do not support current so-called Keynesian policies. I am a fan of the Austrian school of economics.
However, you have to admit, Keynes was one of the giants in his field.
THat was the wrong link (my bad); what I meant is this one:
ReplyDeletehttp://josecamoessilva.tumblr.com/post/26090468664/keynes-in-his-own-words-how-different-from-those
Which shows how anti-Keynes the current "finance spending by debasing currency" approach is.
(BTW, I seriously doubt that any of the current day "Keynesians" read and absorbed JMK's General Theory. Plus, empirical evidence is hard against Keynesian economics -- no derision quotes here, I do mean the economics of JMK.)
Cheers,
J
Even I, who have only a Econ 201 background, can tell that the powers that be only pay lip service to Keynes.
ReplyDeleteWhat we have is NOT Keynesian economics. Its purely spend, spend, spend. Borrow, borrow, borrow.
Its as if the politicians read just the cover jacket blurb on the Cliff notes about Keynesian finance.
And we won't return to classic economics as long as Congress/the Fed can print and spend as much as they like.
Even as originally conceived (with surpluses during a boom), Keynesianism wouldn't work, because it fails to understand what the business cycle really is and why recessions are a necessary part of it. Like forest fires, they clear out the deadwood that accumulated during the last boom, freeing up resources for new businesses to flourish.
ReplyDeleteSince the 1980s we've had neither a real recession nor a real recovery, just ever more easy money to prop up malinvestments that should have been liquidated long ago.
Yup, Keynes warned that the punishments put onto Germany would create an atmosphere ripe for radical politics and likely lead to a second world war. Very amazing how prescient he turned out to be.
ReplyDeleteAs a side note, don't anyone fall for the belief that acceptance of fiscal stimulus is the norm in modern macroeconomics. Google John Cochrane's article, "Fiscal Stimulus RIP"
In my college econ class (30 years ago), my prof pointed out that keynes said that you could manipulate the economy IN THE SHORT TERM, but in the long term, you always had to pay it back (with interest)
ReplyDeleteI have never read Keynes, except the review of his major works by Henry Hazlitt, so any discussion of Keynesian theory that I engage in predicates Hazlitt having done a proper job. Given the effort he went to to keep Keynes' own words, I think he did a good job.
ReplyDeleteSo I will say this.
Keynes believed that banks and the government could literally create wealth out of thin air by printing money.
He believed (or rather advocated) that union-pushed wage rates could NEVER be responsible for a recession or depression.
He believed that deliberate inflationary policy, as in currency debasement, was the proper means of solving the problem he refused to address, that is economic inefficiencies caused by labor union wages.
And he had tremendous suspicion and scorn for both businessmen in particular and for the entire capitalist system in general.
So, Keynes was in reality a crypto-Marxist, not a capitalist.