Was Keynes right?Submitted by luvdispencer on Wed, 03/27/2013 - 13:37
Of course not...right? It's been close to 6 years now since the Federal Reserve started putting Keynes' ideas to the test in their entirety. It defies all logic, it makes Austrian economists scratch their head and hold their breath. At this point we have been flooded with so many dollars the standard metrics cant even keep up, and the rules seem to be changing every day. Bernanke's latest trick is to try and get everyone on board i.e. every central bank copy the Fed. After six years, its safe to say we can rewrite the text books and use the current Fed as a model for averting crisis and regaining stability. You see, moral hazard does not exist and economics has more to do with faith than simple math. Spending is our religion and Keynes is our God.
In econ 101 we learned that too many dollars chasing fewer services and goods causes prices to increase. Well, today we see wealth being extracted from the people at unprecedented rates (taxes, inflation albeit not hyper), fewer people have jobs (less goods and services), and the Federal Reserve creates trillions of dollars from nothing.
GDP the last few years has been around 14 to 15 trillion. If you add up all the money the Fed has created since 2007 it is many trillions and probably pretty close to the GDP. This includes QE, the bailouts and the the discount window. If you create one dollar for every dollar already in existence, surely prices would double right? Not in this universe. Of course, the rest of the world still demands our treasuries for some reason, so that helps keep the inflation at bay, so maybe the prices should have just risen by a 25% or 50%. Nope, not happening. Bernanke loves to remind us that inflation is hovering around a comfortable 2%, and we are at war with deflation. Like I said, arithmetic need not apply here. Our loving God Keynes looks down on us and gives us his blessings, gently reminding us we need to dig more ditches. Keep the faith and keep spending. Our mantra, our creed.
Now, history has proven that every God in the history of mankind has loved us and protected us. Or did I get that backwards? That's right, Gods are created to ease our discontent and solve the problems that have no obvious answers. It is natural to do this of course, the universe is a cold, dark and scary place with so many mysteries. Just like economics I suppose.
Let us just surmise that Keynes is not a God, and Bernanke not his greatest disciple. How can we view what's going on through the lens of liberty and logic? The math just isn't working for us, so we need something else. If you were evil, had control of most of the economy and everyone had faith in you like you were a God, what would you do? I'd keep shooting the heroin (dollars) into your veins and doing the old bait and switch (higher taxes, subtle inflation, omnipresent government) until the entire economy was mine. Absolute control. We are at an economic precipice, about to fall off. But, we are not there yet. You see, God is in every one of us. It is not external, it is internal. It cannot be taken away, just manipulated and turned off. This God gives us our self determination, the energy to seek happiness. We who believe in liberty and freedom from oppression are in a unique position, for it is we that have to put up the fight and spread the good word and awaken those that have lost their inner light. People keep waiting for the antichrist like its going to be one person. It's not, its the Fed, its here and it's very real.