LOGO: Truthdig: Drilling Beneath the Headlines. A Progressive Journal of News and Opinion. Editor, Robert Scheer. Publisher, Zuade Kaufman. Winner 2013 Webby Awards for Best Political Website
May 22, 2013

 Choose a size
Text Size

Trending:     chris hedges     economy     elizabeth warren     politics     robert scheer
Most Read

Lock Up Washington

Rise Up or Die

Revenge of the Bear: Russia Strikes Back in Syria

The Promise of a Courageous Al-Jazeera America May Be Fading

GOP Senator's Hypocrisy on Tornado Aid, Jon Stewart Hates Washington, and More

Most Comments
Most Emailed

Reports
 * NEW! * Lock Up Washington
 * NEW! * Too Soon to Tell: The Case for Hope, Continued
 * NEW! * Warming Climate Endangers U.K. Farming

Ear to the Ground

A/V Booth

Arts & Culture
Act of Congress
Daily Rituals
The Girls of Atomic City

Digs

Truthdig Bazaar more items

 
Ear to the Ground

Financial Contagion and Other Ills

Email this item Email    Print this item Print    Share this item... Share

Posted on Aug 7, 2011
Wikimedia Commons

John Maynard Keynes’ economic theories, seen as tools for keeping employment high, swept the capitalist world in the post-World War II period.

Governments on both sides of the Atlantic are making the same blind, stupid, ideological error: trying to rescue faltering economies with spending cuts. It doesn’t work, as John Maynard Keynes explained decades ago. Nobel laureate Joseph Stiglitz says the abandonment of proven, pro-stimulus Keynsian economic policy means continued high unemployment and revenue loss, which will cripple growth for years to come, ensuring the sustained misery of millions.

The stubbornness of the European Central Bank—which has confirmed itself as an agenda-driven political, rather than merely economic organization by opposing essential financial reforms—takes much of the blame. And Barack Obama’s failure to put Americans to work, demand tax increases, eliminate corporate tax giveaways and renew the payroll tax cut—which would put over $100 billion in the hands of ordinary Americans—etc., ensures more of the same in the United States. —ARK

Joseph Stiglitz at Project Syndicate:

The end of the stimulus itself is contractionary. And, with housing prices continuing to fall, GDP growth faltering, and unemployment remaining stubbornly high (one of six Americans who would like a full-time job still cannot get one), more stimulus, not austerity, is needed – for the sake of balancing the budget as well. The single most important driver of deficit growth is weak tax revenues, owing to poor economic performance; the single best remedy would be to put America back to work. The recent debt deal is a move in the wrong direction.

Read more

More Below the Ad

Advertisement


New and Improved Comments

If you have trouble leaving a comment, review this help page. Still having problems? Let us know. If you find yourself moderated, take a moment to review our comment policy.

By question, August 8, 2011 at 5:18 pm Link to this comment
(Unregistered commenter)

I wonder if there are hard facts/statistics identifying how frequently (or infrequently) Keyesnians have been right (or wrong) about economic predictions & policies since WWII?  They’re so frequently as welcome as a skunk at a picnic, yet in my experience have seemed to be so correct - I don’t understand what the problem is.

Report this
Blackspeare's avatar

By Blackspeare, August 8, 2011 at 4:56 pm Link to this comment

The trick to making Keynesian economics work is to spend money in the proper area to spur the economy.

Report this

By phreedom, August 8, 2011 at 4:51 pm Link to this comment

Part 1(madness)

Apparently there are some huge numbers that act as
bookends or even corners of a square which are
dictating the decisions, or should I say indecisions, 
of our so called “best & powerful”. I suspect we have
been long past a people’s world and live just about
completely in a world of enormous number crunching,
and/or a world where enormous numbers are crunching
countless people.

Hey, another result of fair and just domestically
and/or sovereignty bound regulatory regimes is that
the people of poor and underdeveloped economies have
a good chance of becoming a new consumer base, a base
especially needed to counter balance or absorb
bubbles of debt that have run amok through overheated
economies and/or unbound greed. The investment in
future pools of people, who can afford to pursue a
better quality of life, is a direct reflection of
wealthy nations that have prospered while they had in
place and enforced good and strong financial
regulation and consumer protection policies.

It seems to me, that the argument is now hollow, you
know the one, either shrink government to get a
bigger private sector, expand democracy, enrich the
rich?, or have government spend to create employment
thus income\revenue, resuscitate the middle class. A
now hollow because what is missing from our well
intended suggestion to spend to dig us out, well,
what is missing is the knowledge, or acknowledgment,
that out predicament is a double whammy, but is being
considered or treated as a single whammy. The double
whammy part, the other whammy, being ignored, is that
what led us to this disaster being “unrecoverable”, a
state of now and future looming disaster, well, is
that no investment was made, globally, to sow the
seeds to grow a new crop of well intending and
motivated consumers.

Rhuen Phreed
231 Park Drive, #40
Boston, MA

Report this

By phreedom, August 8, 2011 at 4:50 pm Link to this comment

Part 2(more madness)

I fall on the side of a “better deal” policy should
have been pursued, for huge government spending to
rebuild the country and put people to work, rather
than bank bailouts,,,but you know, unless a few
billion martian consumers fall out of the sky soon,
to fill the vacuum of not having created a new supply
of willing and able consumers over the last 20 years,
a new supply of consumers with the ability to pursue
quality of life changes for themselves, new consumers
that should have come from the weaker economies being
mentored and encouraged sufficiently,, financed
properly and not fleeced completely, well, since this
group never manifested, just were never given the
opportunity,,,, well, I am afraid that even a “better
deal”, one even twice the size of the (old)”new deal
was implemented now, it would still be too much of a
burden for even the desperate, fully employed,
American workforce, working at 200% of its’ capacity.
(that was the end of my sensible side)

The enormous numbers, that us lay people are not
allowed to see or put into the proper prospective,
well, those numbers coupled with the problem that
President Obama and the Republicans(and other
insiders) know that the circumstances are just too
big to be remedied with the same political and
economic systems of the near and far past, well, our
insufficient knowledge and/or understanding of the
scope of current economic causes/conditions, the big
numbers, well,  combined with the hopeless and
hapless leadership, well,  fosters this general
state of madness we all are experiencing. We are not
mad, it is just that our leaders gave up some time
ago, and are doing something we just can’t make sense
of yet, since it has nothing to do with us anymore.
Our political and corporate leaders gave up a long
time ago, 3-4 years ago,  trying to convince us that
the devices and intentions that got us into this mess
would be the same ones to get us out. 

You see, the powers seem to be trying to redirect
this juggernaut of world wide calamity, the madness
in all this, this mind bending farce of inequity.
They appear to be intent on reshaping the world
culture by having it be accepted, that a multi-
generational genocide be part of the economic
equation/recovery. That the imposition of egregiously
inhumane economic measures be applied and become a
newly acceptable theory of economic and financial
calculation. They are kidding us you know.

Rhuen Phreed
231 Park Drive, #40
Boston, MA

Report this

By phreedom, August 8, 2011 at 4:49 pm Link to this comment

Part 3(further madness)

This will be a long and dramatic culling, the quality
of life for whole populations of people considered to
be of high diminishing returns, groups of people
treated as if but a number in some cold mathematical
calculation. Well, this unnecessary sacrifice is
inevitable if we allow any further postponement of
social and economic justice as a direct and
appropriate consequence of this disaster. We must
insist that social and economic justice, now, is the
best and only possible response to real/obvious
political and economic systemic failure. 

When there is no way out of something, there is the
option of using it to some nefarious advantage, I
mean what the heck, in this case, this no way out
situation for our political and corporate leaders is
forcing them to take the option to enhance their
power and prestige. The bow is going to break, they
are just bending it in their direction.

Rhuen Phreed
231 Park Drive, #40
Boston, MA

Report this

By phreedom, August 8, 2011 at 4:48 pm Link to this comment

Part 4(further madness)

Unless we stop this system in its tracks, take away
cruel options of a no way out circumstance, and begin
to be satisfied with reordering institutions along
humane lines, be satisfied with implementing radical
determents to personal and institutional greed/
selfishness, get off the notion that there is a
comfortable and balanced way out of this, that we
just take the hit on our terms and not according to
our so called leader’s now opportunistic intentions,
well, unless we can do those things we are headed for
worldwide fascism. A very efficient and well funded
fascism, led by the misguided pride and greed of our
political and corporate leaders who refuse to admit
they failed us, and now must step down, step far
aside, and cease trying to curve their embarrassment
into a global predator, that sustains itself by
devouring itself, and we along with it,  feeding on
itself and us only to stay alive long enough for us
to forget or be adequately marginalized, or just
plain dead.  They prefer enough time to pass and
enough generations fall into dust, so that even
history has forgotten or has been rewritten to
accommodate a folly made fortune. So that those
victimized by their gruesome mishaps of poor
leadership and thinking, would forget what happened
and why it happened, blame themselves completely, and
of course forget who exactly was responsible for the
carnage.

The grief that our generation and the next will
experience as a result of a prolonged, topsy-turvy,
attempt to quash the reality of misguided political
and economic policies, well, this grief, should not
be accepted, and the intention to impose it on us
considered diabolic, resisted with all our hearts,
and be forever, unforgivable. 

We have a finite world which uses an economic model
that assumes infinite resources and an endless
capacity of people to suffer. The default position
for those who seem to be managing the mess of the
world as it is now, is that the ruse of the infinite
financial or economic model in a finite and very
limited world, full of beings who are by nature
sensitive, and thus suffer, well the default position
of these egomaniacs is that the ruse has generations
yet before it is uncovered for what it is and what it
does, what it has caused.

Right now the ruse is active and obvious, that is why
a normal person cannot make heads or tales of the
reactions of the rich and powerful. They are
temporarily naked to their mutual ruse. Normally the
consequence of this ruse is so far off, at such an
inexhaustible distant in time,  that most people
cannot sense the ruse’s momentum and cannot even
imagine that such anti-earth, anti-people strategies
or policies are actually being pursued.

I do not think the architects of the grand ruse, the
fleecing of mankind and the earth’s resources thought
they could actually leverage the global economy so
far out in its’ future. Insurmountable and endless
debt or leverage is the revealer here, I suppose we
can thank the secret and unregulated world of
derivative trading, and other creative financial
ponzi schemes. I suppose to exhaust the world by
having it live to pay for debt that is incalculable,
beyond repayment, and beyond all reason to have in
the first place, well, is a means to cause the same
effect,  as to have all the world’s resources used
up, completely depleted,, and make desperate the
entire planet’s population.

This has been a rare opportunity to see the ruse
exposed, active and at work, it is truly sick as
hell.

Good luck to us all,,, I might write a book, “when
atlas shit all over us”.

Rhuen Phreed
231 Park Drive, #40
Boston, MA

Report this
Hulk2008's avatar

By Hulk2008, August 8, 2011 at 3:35 pm Link to this comment

Unfortunately, the world is not really a financial test tube - no pure examples.

Historians have traditionally used FDR’s belated approach as an example (he started Keynsian, changed mid-stream, and came back to Keynsian later).  WWII forced a lot of government spending that surely would not have been done otherwise. 

We certainly have examples of the failed trickle-down supply-side approach.  Hoover’s approach was armageddon/catastrophe.  W’s is the Afghani Water Torture method.  Reagan’s era had mixed results especially since he, ironically, raised taxes as well as cutting them (not a purist).  We are still waiting for even a trickle to arrive at the bottom. Al Gore actually did a lot of government streamlining behind the scenes as VP.

And, by the way, where are all those jobs that the “Job Creators” aka wealthy-above-500K-a-year types were supposedly going to generate if we a. passed the W tax cuts, and b. extended the W tax cuts
????

As the King of Siam would say “Is a puzzlement.”

Report this

By Marian Griffith, August 8, 2011 at 3:17 pm Link to this comment
(Unregistered commenter)

The problem is that all the money that -could- have been used for stimulating the economy Keynesian style has instead gone to shore up the creaking financial sector. Who then promptly ran with the money and moved it to any other place in the world they thought would give them a better profit margin.

And, when finally everybody realises that stagflation is a real likelihood, there is no more money for stimulus programs. Debts already are unsustainably high in almost all developed countries. Inflation is creeping up as well. Not dangerously high yet but even in Europe already above what the ECB considers a safe limit, and higher than that in the USA. Kicking the printing press into overdrive (aka. quantitative easing 3) is only going to increase inflation which will smother economic growth as the interest rates on all private debts (credit cards, mortgages, short term loans) as well as company loans will simply raise to match and evaporate what money is pumped into the economy. Cutting down the remaining few programs that put a little spending money in the hands of average people will have the opposite effect (less people able to afford buying things means shops closing, people laid off, manufacturers seeing their orders dwindle, people getting laid off, income tax diminishing, requiring more austerity cuts which only makes matters worse).
And when, as is likely, the next president is a republican he or she is not likely to do the sensible thing, economically speaking. More likely is that in a tea party induced high and revanchism the ‘taxes are theft’ crowd is going to double their efforts to do the very worst thing they can to the economy. Mind, not that should Obama or another democrat candidate become president the result is going to be significantly different. Perhaps a little less tea party high and revanchism and perhaps a few more social security programs will continue to receive inadequate funding, but the bitter fight of intransigence will continue.

I guess it is time to quote the greek proverb: Against stupidity even the gods battle in vain.
The world seems intent to see who can commit economic suicide quickest.

Report this

By thethirdman, August 8, 2011 at 11:26 am Link to this comment

I’m really not an economic expert (heck, even the economic experts aren’t
economic experts) but I don’t know of any real life examples where Keynes’
policies have truly worked out.  Also, there was a whole lot of initial pain, but
seems to me that cutting government spending and privatizing sure seemed to
help out Chile, India, and Russia in the long run (all relatively of course).  Not so
much with Mexico.
Can anyone with solid economic knowledge help me out with some examples for
or against Keynes and government stimulus?  Thanks.

Report this
Newsletter

sign up to get updates


 
 
 
 
Join the Liberal Blog Advertising Network
 
 
 
 
 
 
 

A Progressive Journal of News and Opinion. Editor, Robert Scheer. Publisher, Zuade Kaufman.
© 2013 Truthdig, LLC. All rights reserved.