By Monty Pelerin, on March 7th, 2010
Mark W. Hendrickson wrote a piece on Keynesian Economics in American Thinker today. It is an excellent read for fans or opponents of Keynes. Even better for those who want to learn, or refresh, some economics.
In the piece he discusses the following four topics:
1) Thralldom to the Keynesian macro-economic paradigm.
2) Blindness to history.
3) An enormous faith in government competence.
4) Dangerous assumptions about the capital markets.
Hendrickson concludes with the following:
“Stimulus plans haven’t worked, won’t work, and we can’t afford them. We are already in great economic danger from deficit spending. A policy to plunge us even deeper into the debt abyss is kamikaze economics.”
Related articles by Zemanta
Deathbed of Keynesian Economics Will Be in U.K. (yzerfonteinchronicles.blogspot.com)
Keynesian Economics: Why Krugman and DeLong Need to Read More Carefully (seekingalpha.com)
On Display in the UK: The Failure of Keynesian Economics (dailyreckoning.com)
The Deathbed of Keynesian Economics (lewrockwell.com)
Sheldon Filger: Keynesian Economics Dissected: Deficits and John Maynard Keynes (huffingtonpost.com)
Share/Save
related_posts();
By Monty Pelerin, on December 17th, 2009 Periodically, I include older articles that are pertinent to what is happening now. Here is one that about the Great Depression and the New Deal. I believe it has historical and current relevance.
Myths of the New Deal
By Burton W. Folsom Jr. • August 2002 • Volume: 52 • Issue: 8
A persistent myth in American history is that Franklin Roosevelt and the New Deal created jobs during the Great Depression and helped the poor “forgotten man” who was thrown out of work. Almost every American history text echoes this myth in its pages. Irwin Unger, for example, who won a Pulitzer Prize for a book on economic history, recounts it this way in his textbook These United States: “By 1935 millions of Americans had reason to thank the New Deal and the Democratic party for their compassion and help. Creative men and women were grateful for the opportunity under the WPA to do productive work. . . . Unemployed factory workers could thank the president for the relief that kept them from hunger.”
Henry Hazlitt
Let’s look carefully at the claims that the New Deal created jobs and that these jobs especially helped poor people. It’s true that the New Deal, through the WPA, the PWA, and the CCC, did put many Americans to work building bridges, paving roads, and planting trees. But this didn’t necessarily create jobs. As Henry Hazlitt
Continue reading The Great Depression — Revisiting the Past
related_posts();
By Monty Pelerin, on December 14th, 2009 Anyone following this site knows that I believe that Keynesian economics, especially as practiced by the political class, is wrong. In effect, during the 1930s we jettisoned sound economics and shifted to an incorrect paradigm that has been in force since. The application of this “medieval witchcraft” enabled governments to grow beyond reasonable size and become indebted beyond the possibilities of repayment. Politicians seized powers they should not possess and created business cycles that were unnecessary.
As a result of economic abuse over these many decades, we find ourselves in an economic crisis from which there is no escape save government default and/or hyperinflation.
A new book entitled Where Keynes Went Wrong raises the following issues:
“… should we be relying so completely on Keynes? What if he is wrong? What evidence is there that he is right?
These are important questions. If Keynes is wrong, then so are the economic policies of Barack Obama, George W. Bush, and virtually all world governments today. Instead of giving us a sustainable economic recovery, they will just lead to inflation, bubbles, and crashes.”
While I have not read the book, a review can be found here.
Share/Save
related_posts();
By Monty Pelerin, on December 7th, 2009 This article appeared in Fortune. For those unfamiliar with mortgage-backed securities and the disgraceful behavior of the parties involved, it is a simple and sickening microcosm of what was happening on Wall Street.
Junk mortgages: It just gets worse
In 2007 we dissected one toxic issue. The horror story continues, but can we still learn from our mistakes?
By Allan Sloan and Doris Burke
Last Updated: December 1, 2009: 9:51 AM ET
NEW YORK (Fortune) — Back two years ago when the mortgage meltdown was heating up, we wrote an article called “Junk Mortgages Under the Microscope” dissecting a particularly wretched mortgage-backed securities issue peddled by Goldman Sachs.
Paulson and Corzine, Former Heads of Goldman Sachs
We wanted to show how these complex securities really worked and how Moody’s and S&P, the rating agencies, aided and abetted the process by giving two-thirds of an issue backed by ultra-risky second mortgages the same safety rating they gave to U.S. Treasury securities.
We thought this was a cautionary tale — but it’s turned into a horror story. All the tranches of this issue, GSAMP-2006 S3, that were originally rated below AAA have defaulted. Two of the three original AAA -rated tranches (French for “slices”) are facing losses of about 90%, and even the “super senior,” safer-than-mere-AAA slice is facing losses of 25%. How could this happen? And what lessons can we take away from it?
Let’s revisit the way this security was put together, and how and why it fell apart. And for the first
Continue reading The Anatomy of a MBS from Goldman Sachs
related_posts();
By Monty Pelerin, on December 6th, 2009 David Malpass has written an outstanding article in the Wall Street Journal. He details how the Fed’s low interest rate policy is adversely affecting capital allocation, creating what the Austrian School of Economics would call malinvestment. His analysis is microeconomic-based as opposed to the macroeconomic nonsense so prevalent today and is well presented and sound.
My only objection to his piece is that it ignores the political environment in which it must be applied. While allowing interest rates to rise would be politically unpopular, that is not my specific objection. Rather, I refer to issues raised in a previous post where I likened the Fed to the Treasury’s ATM machine. There I stated “…the reality is that the Fed is an arm of the Federal Government. It is not the dog, it is the tail. It has become the Treasury’s ATM machine, whether it wants to be or not.”
Given the deficits that the US Government is running and plans to continue to run, the Fed is unlikely to be able to stop buying Treasuries. Either they continue to do so or the Federal Government becomes insolvent, unable to pay its bills. If they are unable to stop this Quantitative Easing, it is unlikely they can have much of an effect on interest rates. The Fed administers some interest rates, but the market determines most interest rates. If liquidity keeps pouring into markets, real interest rates are apt to remain low for a long period.
Even if the Fed
Continue reading David Malpass: Economics Yes; Politics No
related_posts();
|
Friedrich von Hayek
Friedrich von Hayek founded the Mont Pelerin Society.
“Monty Pelerin” is a pseudonym chosen by this blogger to convey general agreement with the philosophy, goals and spirit of the Mont Pelerin Society. No other connection exists between the blogger and the Society.
|
