Has this (lack of a) recovery refuted Keynes?

[ReformCollege]

Here is the question, has this lack of a recovery refuted Keynesian Economics? After numerous industry bailouts, two rounds of monetary expansion, and a stimulus package, we have seen one of the largest applications of Keynes deficit spending in history, record low interest rates, and still we are here 4 years after the economic crash with 8.2% unemployment. And the worst part is, it hasn't budged for 3 months straight.

So my question is, has Keynesian economics been refuted?

 

[Kyle LaValliere]

Here is the question, has this lack of a recovery refuted Keynesian Economics? After numerous industry bailouts, two rounds of monetary expansion, and a stimulus package, we have seen one of the largest applications of Keynes deficit spending in history, record low interest rates, and still we are here 4 years after the economic crash with 8.2% unemployment. And the worst part is, it hasn't budged for 3 months straight.

So my question is, has Keynesian economics been refuted?

Keynesianism was refuted in the 1970s which is why it was particularly absurd to turn that way for this recovery. So I guess it's been re-refuted.

 

[Henrin]

Keynesian economics has been refuted a long time ago. The failure in his thinking is rooted in his inability to take into account human nature in his theory and an economic theory that ignores human nature is worse than cleaning a dog that just rolled in mature and it dried solid on their fur and when you mess with it the mature because loose once again. Not loose as if it will roll off the dog when you start running water on it, but the sticky kind of loose where it won't remove itself from the fur and you have to get in there to get it off with your hands all while it gets all over your hands or arms and chest and probably the wall of your house if it decides to try to shake in the middle of it all. In short, its a complete nightmare. Lets go through it.

1. Because it needs more money into the system this causes speculative bubbles which in turn will burst and cause recessions.

2. Because it needs massive amount of spending it needs cut at some point and his big plan here was that its fine if you just do it when you have full employment.

3. Government simply will not cut spending just because you have full employment. We are talking about their jobs and they will simply not accept an action that will lead them to lose it. Cutting enough spending to get what Keynes says to do next will make that a reality. Furthermore, you have given the power to spend however much they want by putting in place a system that can handle the keynes model. You can't expect that when you give someone unlimited resources they will just not use it. They will become the locust that just feeds on everything and everyone and there is nothing you can do to stop the swarm at that point.

4. Certain programs it creates can not simply be cut without causing a downturn in the economy and possibly another recession. It hardly matters if you have 4% unemployment, if you cut the spending necessary to be able to pay off the debt you caused you will have another recession on your hands. Knowing full well that you can't just cut the added spending and must go into long established spending that the economy is dependent on, another recession is going to happen if you follow his plan all the way through. Therefore, his plan only really looks like its working if you just get the economy out of the hole and never do what he says must happen to resolve the debt. That is of course if you are unaware that really all you did was cause another bubble with his plans in the first place and you did so on top of the old bubble that you never allowed to burst completely.

 

[ChunkySalsa]

1. Because it needs more money into the system this causes speculative bubbles which in turn will burst and cause recessions.

2. Because it needs massive amount of spending it needs cut at some point and his big plan here was that its fine if you just do it when you have full employment.

3. Government simply will not cut spending just because you have full employment. We are talking about their jobs and they will simply not accept an action that will lead them to lose it. Cutting enough spending to get what Keynes says to do next will make that a reality. Furthermore, you have given the power to spend however much they want by putting in place a system that can handle the keynes model. You can't expect that when you give someone unlimited resources they will just not use it. They will become the locust that just feeds on everything and everyone and there is nothing you can do to stop the swarm at that point.

4. Certain programs it creates can not simply be cut without causing a downturn in the economy and possibly another recession. It hardly matters if you have 4% unemployment, if you cut the spending necessary to be able to pay off the debt you caused you will have another recession on your hands. Knowing full well that you can't just cut the added spending and must go into long established spending that the economy is dependent on, another recession is going to happen if you follow his plan all the way through. Therefore, his plan only really looks like its working if you just get the economy out of the hole and never do what he says must happen to resolve the debt. That is of course if you are unaware that really all you did was cause another bubble with his plans in the first place and you did so on top of the old bubble that you never allowed to burst completely.

To sum it up, you say Keynesian economics has been refuted because we've refused to actually implement it? And doing so is politically unviable, such that we are incapable of actually implementing it?

What alternative economic systems, which accommodate for political reality, do you advocate?

 

[Bob Blaylock]

To sum it up, you say Keynesian economics has been refuted because we've refused to actually implement it? And doing so is politically unviable, such that we are incapable of actually implementing it?

That sounds very much like a common, but invalid, defense of Communism. Everywhere that Communism has been attempted, it has failed. The common defense that is made of Communism is that it failed because it was never truly implemented, that every time the attempt was made, it ended up deviating rather far from the course that Marx said it should take,and that if those who were trying to put it in effect had stayed true to Marx's proposed course, Communism might have succeeded. I say that this defense is false, because the deviation is an unavoidable effect of human nature differing sharply from Marx's erroneous assumptions about human nature.

Same with Keynesianism. Every time it has been tried, it has failed, and in the same way that Communism has failed. Human nature is not what Keynes or Marx assumed it to be, and both of these philosophies fail, in practice, because human nature forces them in directions other than those that the creators of these philosophies expected.

 

[Henrin]

To sum it up, you say Keynesian economics has been refuted because we've refused to actually implement it? And doing so is politically unviable, such that we are incapable of actually implementing it?

I'm saying a few things.

1. Its against the interest of government officials to cut the spending.
2. In order to pay off the debt caused you will have to cause a down turn in the economy.
3. These downturns will with little doubt be recessions as you will need to not only cut the increased spending but also established spending.
4. His idea that its fine if it is done under full employment is complete and utter make believe.
5. Four wouldn't be a huge problem if the government wasn't always interested in growing its influence and using his ideas along with other ideas to reach those ends. This has caused the economy to largely be dependent on government spending. To a large degree as you probably now, not withstanding a few exceptions, government spending causes dependence on that spending.
6. Speculative bubbles are caused by his plans as an unintended result of the type of system his plan calls for.
7. Having the ability to spend massive amounts causes massive spending in people. It hardly matters if it is a government or if it is a individual person. The ability to spend massive or worse unlimited amounts is what causes people to become locusts.

Its not about being unwilling to finish with his plan, but that his plan is against human nature and basic common sense. It simply does not work, and if you complete it the illusion that it is working is destroyed completely.

What alternative economic systems, which accommodate for political reality, do you advocate?

That is a bit off topic..

 

[PeteEU]

Here is the question, has this lack of a recovery refuted Keynesian Economics? After numerous industry bailouts, two rounds of monetary expansion, and a stimulus package, we have seen one of the largest applications of Keynes deficit spending in history, record low interest rates, and still we are here 4 years after the economic crash with 8.2% unemployment. And the worst part is, it hasn't budged for 3 months straight.

So my question is, has Keynesian economics been refuted?

no it has not. The crash was bigger, far bigger, than the stimulus was, and hence the effect was not as big as it was hoped. Plus for the record... the US has been deficit spending for the most part of the last 100 years.

 

[PeteEU]

Same with Keynesianism. Every time it has been tried, it has failed, and in the same way that Communism has failed. Human nature is not what Keynes or Marx assumed it to be, and both of these philosophies fail, in practice, because human nature forces them in directions other than those that the creators of these philosophies expected.

LOL seriously... and you base this on what exactly?

 

[Henrin]

LOL seriously... and you base this on what exactly?

He probably bases it on much of what I said earlier.

1. You can't finish it.
2. No one will finish it.
3. The growth out of the recession is caused from the creation of another bubble on top of the old bubble.
4. Full employment does nothing to counter the side effects of cutting the spending needed to undo the debt in the economies that practice his plans.
5. People are not perfect and neither is economics and coming up with a plan that needs a perfect order to function has no use in the economic world.
6. Thinking government will just use job programs to get itself out of a recession or that it will be all that is called for is being ignorant of just about the entire subject be it either the nature of recessions or human nature and the history of government.
7. Job programs still cause debt and you will still need to deal with that debt later on as he said you would, the problem is however that the cuts have to come from somewhere and considering that you won't simply be cutting normal government functions but functions that the economy has been dependent on from past actions by the government(entitlements/subsidies) it will hurt the economy considerably.

In short, it has never worked. Illusions are still illusions my friend.

 

[iguanaman]

I'm saying a few things.

1. Its against the interest of government officials to cut the spending.
2. In order to pay off the debt caused you will have to cause a down turn in the economy.
3. These downturns will with little doubt be recessions as you will need to not only cut the increased spending but also established spending.
4. His idea that its fine if it is done under full employment is complete and utter make believe.
5. Four wouldn't be a huge problem if the government wasn't always interested in growing its influence and using his ideas along with other ideas to reach those ends. This has caused the economy to largely be dependent on government spending. To a large degree as you probably now, not withstanding a few exceptions, government spending causes dependence on that spending.
6. Speculative bubbles are caused by his plans as an unintended result of the type of system his plan calls for.
7. Having the ability to spend massive amounts causes massive spending in people. It hardly matters if it is a government or if it is a individual person. The ability to spend massive or worse unlimited amounts is what causes people to become locusts.

Its not about being unwilling to finish with his plan, but that his plan is against human nature and basic common sense. It simply does not work, and if you complete it the illusion that it is working is destroyed completely.



That is a bit off topic..

Another who admits that a Romney Presidency would mean another recession and that that is what Americans deserve. What is it with Republicans and recessions? What did the American people do to deserve more suffering? Are you one who benefits from recessions? A very few wealthy people do but the vast majority will be hurt greatly by another downturn.
You seem to equate Keyes with Communism, which shows how little you know about economics but you do have one thing right.
Romney is lying about creating jobs and his plan will skyrocket unemployment above 10% in his first term recession.
Oh and the deficit will skyrocket too from reduced revenues from the recession and more tax cuts for himself.
And you won't care one bit because most of us will just be getting our just reward for being lazy good for nothing Americans.
What's next? Hunger Games?

 

[PeteEU]

He probably bases it on much of what I said earlier.

1. You can't finish it.
2. No one will finish it.
3. The growth out of the recession is caused from the creation of another bubble on top of the old bubble.
4. Full employment does nothing to counter the side effects of cutting the spending needed to undo the debt in the economies that practice his plans.
5. People are not perfect and neither is economics and coming up with a plan that needs a perfect order to function has no use in the economic world.
6. Thinking government will just use job programs to get itself out of a recession or that it will be all that is called for is being ignorant of just about the entire subject be it either the nature of recessions or human nature and the history of government.
7. Job programs still cause debt and you will still need to deal with that debt later on as he said you would, the problem is however that the cuts have to come from somewhere and considering that you won't simply be cutting normal government functions but functions that the economy has been dependent on from past actions by the government(entitlements/subsidies) it will hurt the economy considerably.

In short, it has never worked. Illusions are still illusions my friend.

So, no economic theory has worked then?

 

[Henrin]

So, no economic theory has worked then?

Plenty of economic plans were actually finished all the way through and worked to some degree, so that makes little sense.

 

[Somerville]

Plenty of economic plans were actually finished all the way through and worked to some degree, so that makes little sense.

and they were?

At this time only Iceland's plan, which entailed telling the various bondholders and international banks to go play elsewhere seems to have worked well.

Can anyone imagine the Republicans allowing legislation that would force banks to forgive all mortgage debts that exceed 110% of a residence's present market value?

People Vs Markets

Iceland’s approach to dealing with the meltdown has put the needs of its population ahead of the markets at every turn.

Once it became clear back in October 2008 that the island’s banks were beyond saving, the government stepped in, ring-fenced the domestic accounts, and left international creditors in the lurch. The central bank imposed capital controls to halt the ensuing sell-off of the krona and new state-controlled banks were created from the remnants of the lenders that failed.

Then there is the willingness of Icelandic prosecutors to lay charges against bank officials

Legal Aftermath

Iceland’s special prosecutor has said it may indict as many as 90 people, while more than 200, including the former chief executives at the three biggest banks, face criminal charges.

That compares with the U.S., where no top bank executives have faced criminal prosecution for their roles in the subprime mortgage meltdown. The Securities and Exchange Commission said last year it had sanctioned 39 senior officers for conduct related to the housing market meltdown.

The failure to prosecute those guilty for the near collapse of the American banking system almost certainly ensures the nation will see the same thing happen again in the 15 - 20 years. It was 1989 - '92 the US experienced the failure of many savings & loans institutions, 2007 saw the beginning of the mortgage crisis that caused the 2008 - '10 recession.

 

[iliveonramen]

Here is the question, has this lack of a recovery refuted Keynesian Economics? After numerous industry bailouts, two rounds of monetary expansion, and a stimulus package, we have seen one of the largest applications of Keynes deficit spending in history, record low interest rates, and still we are here 4 years after the economic crash with 8.2% unemployment. And the worst part is, it hasn't budged for 3 months straight.

So my question is, has Keynesian economics been refuted?

I don't know of many non-fringe economists that believe that not bailing out the banks or car industry would of had us in a better situation than we are now.

I don't know of many non-fringe economists that believe the stimulus didn't increase GDP.

I don't know of many non-fring economists that have a problem with keeping interest rates low while we're not facing inflationary pressure.

I also think you're grouping all government intervention with Keynes which is wrong.

I'd like to point out the stimulus was actually comprised heavily of tax cuts rather than some massive public works Keynsian stimulus.

 

[PeteEU]

Plenty of economic plans were actually finished all the way through and worked to some degree, so that makes little sense.

Oh which and when?

 

[Stewart]

Well we had a recovery here, and I believe our two rounds of stimulus funding played a role. Of course, it may just have delayed the inevitable impact of retailers a little.

 

[ReformCollege]

I don't know of many non-fring economists that have a problem with keeping interest rates low while we're not facing inflationary pressure.

Liquidity trap. If banks aren't lending, low interest rates don't make a difference.

 

[Lord Tammerlain]

Keynsian economic theory has worked in China, especially during the last slowdown, but unlike the US, China had the money to afford the stimulus.

 

[Kyle LaValliere]

I don't know of many non-fringe economists that believe that not bailing out the banks or car industry would of had us in a better situation than we are now.

I don't know of many non-fringe economists that believe the stimulus didn't increase GDP.

I don't know of many non-fring economists that have a problem with keeping interest rates low while we're not facing inflationary pressure.

I also think you're grouping all government intervention with Keynes which is wrong.

I'd like to point out the stimulus was actually comprised heavily of tax cuts rather than some massive public works Keynsian stimulus.

Better situation? We're almost in the same situation we were in 2002. The too big to fail banks are bigger than ever. Dodd-Frank makes them even more likely to be bailed out next time, so I'm sure they're into the same malinvestment they were before. Fannie Mae and Freddie Mac are still getting bailouts. GM is still at the bottom of the barrel and losing market share and might be grovelling for another bailout in the next few years. The CEOs of all of the above are still raking in millions of dollars while their companies teeter on the edge. And the last quarter GDP growth was 1.2% - I don't hear anyone crowing about that.

All that with how many hundreds of billions added to the debt?

If economists are happy about all that, shame on them.

 

[beerftw]

Keynsian economic theory has worked in China, especially during the last slowdown, but unlike the US, China had the money to afford the stimulus.

well you brought up a good point of keynesian economics,austerity.real keynesian economics requires austerity under good times and spendingunder bad,the good times prepare for the bad.

most modern keynesians think if money is spent the economy will be good,then keep spending the same after the recovery.the idea of keynes was not to support bubbles or keep an economy on life support,but rather to hand it a set of crutches to help it walk on its own then stay away from the economy until it breaks its leg again.keynesian economists have never practiced true keynesian theroy,only the parts they like,and keep practicing them long after they werent needed,draining funds that could be built up for the next recession.

before reagan almost every democrat and republican practiced keynesian theories,even though horribly slaughtered.they were ended because keynes theories work great under demand side problems,but failed to tackle supply side problems of the 70's and 80's.people dont realize supply side problems are corrected by supply side economics,and demand side by demand side economics,people try to pick and choose not realizing niether solves all problems.

one of the most noted supply side pushers reagan was also a heavy practicer of keynesian economics through military keynesianism,though his were unique by usng both supply and demand side fixes without blatantly admitting he used demand side fixes.bush junior accused of being a trickle down economist practiced keynesian economics to an extreme extent,through stimulous tax cuts and military keynesianism,as well as expanding food stamps and medicare.

 

[Kyle LaValliere]

Well we had a recovery here, and I believe our two rounds of stimulus funding played a role. Of course, it may just have delayed the inevitable impact of retailers a little.

My favorite chart in the U.S. predicted that at this point, without stimulus, we would have between 5.5 and 6% unemployment. Instead, with stimulus, we have 8.3% unemployment. So either they predicted the non-stimulus unemployment horribly - which they haven't admitted - or the stimulus actually made unemployment worse by a substantial degree.

 

[Stewart]

My favorite chart in the U.S. predicted that at this point, without stimulus, we would have between 5.5 and 6% unemployment. Instead, with stimulus, we have 8.3% unemployment. So either they predicted the non-stimulus unemployment horribly - which they haven't admitted - or the stimulus actually made unemployment worse by a substantial degree.

Or the recession, structural issues was so poorly understood that the stimulus wasn't large enough... Economics is called the Arcane art of Bull**** for a reason, ya know.

 

[Kyle LaValliere]

Or the recession, structural issues was so poorly understood that the stimulus wasn't large enough... Economics is called the Arcane art of Bull**** for a reason, ya know.

Your guess is as good as mine - and apparently as good as the U.S. government's. With our debt-to-GDP ratio now over 100%, I'd like something more than a wild guess before adding even more to the $830 billion. Even if you accept the White House's number of 3 million new jobs from the stimulus - which I sure don't - that's still $276,000 per job. Those better be some awfully good jobs for that price! If you break it up, you start to see the true agenda in the Obama stimulus, like $9 billion for solar and wind projects. The final result there was 910 jobs - that's almost $10 million per job!

 

[iliveonramen]

Better situation? We're almost in the same situation we were in 2002. The too big to fail banks are bigger than ever. Dodd-Frank makes them even more likely to be bailed out next time, so I'm sure they're into the same malinvestment they were before. Fannie Mae and Freddie Mac are still getting bailouts. GM is still at the bottom of the barrel and losing market share and might be grovelling for another bailout in the next few years. The CEOs of all of the above are still raking in millions of dollars while their companies teeter on the edge. And the last quarter GDP growth was 1.2% - I don't hear anyone crowing about that.

All that with how many hundreds of billions added to the debt?

If economists are happy about all that, shame on them.

So....what exactly would a Libertarian in charge do....let the financial sector collapse? Nationalize the banks then break them up (which a lot of prominant Democrats supported)?

 

[iliveonramen]

Liquidity trap. If banks aren't lending, low interest rates don't make a difference.

Which is exactly the situation that Keynes stated required monetary stimulus.