Keynesian Continuum (Republicae)

It is, at times, difficult to wade through all the subtle changes that have occurred in this country, particularly the truly drastic changes that took place during the 20th Century. The problem is that there is simply not much information about these subtle, but drastic and transformative changes that were implemented in our government and country but, there are hints.

These hints can be found in various publications, documents and news sources from the period from the 1930's to our present day, but the interpretation of these hints requires connecting dots that are not always apparent. One area in particular went through a massive and relatively misunderstood metamorphosis beginning in the 30's and today we remain trapped by those changes in the very foundational structure of our economic system.

It was, without a doubt, a revolution; one that completely overturned the order and role of our government in our lives. This revolution came in the form on a complete economic transformation that promoted the intervention of government into the markets, but that was just part of the story; for this transformation allowed the government to expand its ability to intervene into every area of the lives of the American People.

Under the cloak of saving free market capitalism this revolution subverted the very foundations of the free market and throughout the process it has been instrumental in subverting the Constitutional foundation of individual freedom within this country. The Great Depression opened the door to the imagination of economists and politicians; since that time it has run wild.
The government came to the rescue during the 1930's and has been in the rescue business ever since. What the American People didn't know was the heavy price of that rescue; most are still unaware of the actual price that they have paid since the government came to the rescue or the price they continue to pay. They say that nothing is free and that has never been as true as what we have been wooed to relinquish in return for what is purported to be economic security.

We look at what occurred during the 30's and think that the government only intervened in the markets, banks and industry, but the truth is that this was only a portion of the rescue plan that revolutionized the foundational economic and political principles of our country. The other part of this rescue plan involved the government playing a direct role regulating all income, savings, and investments and spending.

Of course, we think we are in control of our income, our savings, spending and investments, but the reality is that the government has implemented controls through various subsidies, taxation, as well as government ownerships and partnerships in various sectors of the economy. Even wages and prices are manipulated through this system of government management. For decades we have been fed the line that we live under free market capitalism, but it is impossible to compare what this government has done over the past three quarters of a century and believe that it remotely resembles free market capitalism or freedom, for that matter.

With the goal of full employment and capacity production, this government began to take a path that would radically change the entire complexion of not only the political economy, but the social economy of this country. In the process, the structure of our government was also transformed into a system of bureaucratic administration responsible for the management of this massive economic machine they created. Once this system was created it could not be abandoned without massive economic and social disruption, the political price for such disruption would simply be too high a price for the politicians to pay therefore, it continues. Of course, it is not without its benefits, but those who benefit are not the working men and women of this country.

In order to sugar-coat the reality of this massive management system the government bureaucrats invented various labels such as "Compensatory Fiscal and Monetary Policy", it simply sounded much better than Government Managed Economy, but the name doesn't change the meaning. The drift into a socialized system of economic, social and political management began during the 30's and the march toward a full-fledged, systematic socialistic government has continued unabated. Once implemented, the system became self-perpetuating.

As J. Kenneth Galbraith said:

"There is a widespread notion that one of the most primitive of modern ideological choices is whether a government shall be Keynesian or not . . . no present or future administration really has the non-Keynesian choice."

Regardless of which political party is in office, the nature of this political economic system, once it was implemented, became self-perpetuating. It moves the country toward a self-socializing form of government regardless of the desires of the People of this country and even our elected representatives. The revolution in economy thought during the 30's was far more than economic in nature; it was also completely revolutionary in the political and social arenas as well.

There should be no doubt as to the direction the Keynesian, Neo-Keynesian and Post-Keynesian ideologies are taking this country. As Paul A. Samuelson stated: “[Fascist Regimes] have often passed socialistic measures. This is not a paradox at all, for fascism was (or is) a form of socialism similar to British socialism, or to the managed-currency, welfare state proposed by American Keynesians.”

By the 1940's this revolution in "new economics" had infiltrated the universities of this country and permeated economic thinking to the point that all opposing views were effectively rooted out of the higher educational system in this country. A generation of economic students were completely indoctrinated in the essentials of this new economic catechism. By 1950, the majority of universities and professors were teaching this new economic doctrine, textbooks reflected the accepted doctrine and the students were oblivious to just what they were being taught since it was the only accepted school of economic thought presented.

The truth of the matter is that so-called new economic theory was not new at all, but a revival of core socialist patterns of economic thought that were formulated during the second half of the 1800's. This core socialist pattern involved government intervention into economic affairs that would gradually lead to government intervention into social affairs; the outcome of which would be a transformation of the entire political structure of the country.

One of the ideas that arose from The Great Depression was the idea of "social-consumption expenditures", sounds innocuous enough until we understand what it means and the purposes behind such expenditures.

Lawrence Klein, in his book "The Keynesian Revolution" provided the meaning and the purpose behind such expenditures:

"We need a non-profit institution like the government which can provide a comprehensive, minimum program of social security in order to reduce the propensity to save. This program must cover the entire population, and it must cover all those contingencies which cause people to save on a large scale for the future."

While maintaining the label of free-market capitalism and individual freedom that is associated with it, we have a system that both confiscates and redistributes the labor property of people in order to reduce savings. In a managed economy, savings is an anchor that weighs down the movement of the entire system of this political economy. Under this managed system savings must either be drastically reduced or eliminated all together in order for other aspects of control to take place; it is easy to see that the reduction of savings in this country has been achieved.

Remember, the goal is worker productivity, full employment that allows the system to continue maintain control, particularly social control; without it the flaws in the system quickly become apparent. The focus therefore, is jobs; even the most useless jobs are considered vital to the entire complexion of the system. To understand just how far this ideology goes the words of Theodore Morgan explains the extent that the government will take in order to maintain the system: ". . . even from the point of view of output, it is better to employ men in digging holes and filling them up than not to employ them at all; it is better to employ men to make products which we thereupon dump in the middle of the ocean than to leave them idle."

Of course, all of this was seen during The Great Depression, the government followed the recommendations of Keynes to "do something". This rather strange concept can be found throughout the economic theories of those who espoused the "new economy". While it is apparent that those who follow such economic thought must have considered their proposals and theories logical, the following example should show just how irrational these people were, and still are: "Giving money to foreigners is a form of "investment," even though we get nothing in return. If we could only export one of the printing presses used for the manufacture of Federal Reserve Notes to, let us say, China, our foreign investment would be enormously higher."

Keynesian lunacy has run rampant in our country and still, to this very day, influences our government in ways that few understand. According to these ideologues, government spending, obviously of any type, stimulates private employment and economic stability, yet it is all financed through taxing or inflationary monetary policy which drains and strains the entire "private sector" within the mixed economy. As we have seen, this government, along with its partner in managed finance: the Federal Reserve Bank, has effectively manufactured the monetary system needed to achieve the socialization of this country, without the use of a fiat monetary system none of this would be possible. It is also a mistake to believe that the Federal Reserve Banking system serves an economic purpose, it does not, its purpose is political in nature and the directors of the Federal Reserve are completely faithful to the political trust of those who appointed them and the legislation that allows the bank to continue functioning in a political capacity that promotes very specific socio-economic agendas.

Those who followed Keynes were well aware that sound money had to be destroyed otherwise there would simply be no way to implement the complete core socialist pattern in this country. The various proposals of Keynes and his subsequent disciples, who advocated "compensatory fiscal and monetary policies", by implication, necessitated the abandonment of sound money and this was accomplished by the introduction of inconvertible currency. Once the currency became inconvertible it was merely a formality to then create a total fiat system, which was accomplished in 1971. As Nixon said when he cut all ties between the U.S. Federal Reserve Note [once known as the Dollar] and gold: "We are all Keynesians now!"

Of course, Keynes was well aware of the dangers of fiat currency, so too have his subsequent Keynesians and Keynesian-derivations. They have all readily admitted that inflation, and the depreciation of the fiat currency is a problem, but they maintain it is controllable, but the controls are as onerous as the problem. Thus to prevent the effects of an ever-expanding fiat monetary supply, these proponents maintain that the government must have the power to manipulate credit, interest rates, prices and wages. The government, in accordance with this ideology, must be "given" total control over all fiscal policy.

This control, this power "allows" them to spend whenever and spend whatever amount that they "feel" is needed to stimulate the economy, but it also "allows" them to tax, regulate and stifle to any degree to restrain the subsequent inflation brought about by their print and spend fiscal policies. What this means is that the government central planners have a direct affect on the lives of each and every American. Not only do they directly affect the lives of Americans in terms of individual income, savings and expenditures, but essentially the future of the American People to actually determine the direction of their lives is also affected by these policies.

Now, because of the very nature of this "new economic" system, the only alternative to this form of management is for the government to implement wage and price controls. If all of this sounds like Socialism, there is a reason for that. Many of our politicians; and most of those who adhere to the officially approved economic thought don't seem to realize just what this system has done and is doing to this country. It is absolutely amazing to listen to our politicians, the economists they listen to and the media that covers this entire theatrical production of folly and irresponsibility. The have utterly failed to grasp the fact that by "allowing" government to maintain complete control over fiscal and monetary policy that it has effectively abolished the free market principles that promote individual liberty and freedom. The entire concept of government control over the aspects of the market is completely inconsistent with the Constitutional traditions of the United States and destructive to those means.

However, to avoid the flaws inherent within this mixed and managed economy, the government must maintain and expand its authority over taxes, spending, credit, investment, wages and general price controls otherwise the system eventually stumbles. Thus, the self-perpetuating nature of the system becomes of paramount importance even though every solution becomes a subsequent problem that requires yet another solution which creates even more problems. The cat cannot stop chasing its own tail.

Again, to understand the mentality of these "new economists", these Keynesians and Keynesian-derivatives we need look no further than their writings. When dealing with the rapid increasing debt, these economists seem to give us a choice between two untenable conditions. As the Stanford economist Tarshis stated: "If we do not want high debt, high interest rates, high wages, and high prices, then in effect we do not want high employment and prosperity." Such logic is required by this political economic ideology and by implication, the system does not allow for one without the other.There are so many connections that are unseen in this system, so many forces at play that few know the consequences of the interactions of those forces, but the consequences are becoming more and more evident.

One such consequence we are facing today is that of our creditors and their willingness to continue to finance our economy through the purchases of U.S. Treasuries. Even a few decades ago this question was on the minds of the Keynesians, once again as Tarshis said: "The only question, then, is whether the government can always find a lender or someone who will accept government bonds. In the final analysis this is no problem for the simple reason that the government controls the Federal Reserve Banks and can always compel them to buy government bonds. Anyone who controls a bank and is free to make the rules under which it operates will have no trouble in borrowing money. The government is in precisely this position, and therefore can always secure funds.There is no sign that a high debt exhausts the credit of the government of the United States. And since as a last resource "it can borrow from itself," there need be no fear on this account."

In the same vein of thought, Lawrence Klein said: "An internally held public debt can never be a burden, because we owe it to ourselves." Of course, this line of thought rests solely upon the idea that the managed "mixed economy" can, under the "compensatory fiscal and monetary policies" continue to grow enough to produce a balance between production and debt, thus affecting the ability to reduce the burden of debt. The balancing act cannot however, be sustained under such an economic system because the system is in constant conflict with the natural market forces that always seek to correct distortions, particularly when those distortions are created by numerous and massive external interventions which seek to artificially manipulate the economy for social and political reasons. Those social and political reasons are based in the concept that the government is the sole provider of appropriate social action, thus it is therefore, the sole granter of all benefits to achieve such action.

Another Keynesian voice from the 50's denotes the attitude that now flourishes in this government: "Probably, majority opinion agrees with our own national policy that the right of a man to engage in business for himself is not a basic freedom." ~ Theodore Morgan. This grand ideological experiment has created the most unbelievable contradictions in our country; while labeling itself as the defender of our liberty and freedom on one hand, on the other it implements policies that are totally and absolutely alien to the principles this country was founded on. It is as if those in our government cannot understand the connection between economic freedom and individual freedom; there is no concept within our government that not only does "compensatory fiscal and monetary policy" infringes upon the liberty of the People, but that it actually contributes to a steady decline in the economic prosperity of this country.

Make no mistake about what the so-called ethical goals of this government are, those goals are doctrinally Socialist whether it is ever admitted or not. Through the years, the decades, it has been easy for these ideologues to accuse and blame free-market capitalism for all the economic and social woes faced in this country, yet when we understand that those economic and social woes are not the result of free-market capitalism, but are a direct result of seven decades or more of government intervention and social engineering.

Even today, the People are hearing that in order to save free-market capitalism we need to abandon the principles of the free-market. Saving capitalism seems to be the favorite mantra of Socialist ideologues and yet, today, as in the 1930's, the problem is not the free-market, but the distortions brought about by government intervention. Under this Keynesian Socialist system the solutions always turn into problems that require more solutions; this fact is clearly evident by looking at the effects of this economic thought in this country over the last seventy-five or more years.

Through the decades, there has been a growing vested interest in the various types of government spending, especially in terms of subsidies; political corruption is a natural outcome of the creation of such vested interests. Indeed, along with vested interests in spending and subsidies, there is the inclination toward inefficiency and waste, not only in material resources, but in terms of human resources as well.

We have allowed our minds to be glossed over with decades of indoctrination that presents a completely different portrayal of our political, social and economic situation in this country; the reality is concealed by years of acceptance and compliance. Those who continue on this diet of social preferences, politically correct social planning and the collective conscience of our country never understand the problems that such policies create, they simply appear unable to see the connection and therefore they must always seek yet another scapegoat on which to place their hands before banishing the animal to the wilderness. Eventually there will be no scapegoats on which to place blame and they will have to take full responsibility for the policies they have promoted and enacted.

As a former Keynesian, Dr. L.A. Hahn stated: For it [the Keynesian view] presupposes an economy whose members do not see through the changes brought about by monetary or fiscal manipulation or as some might say, the swindle. Above all, it presupposes that people are blinded by the idea that the value of money is stable by the "money illusion."

Indeed, Keynesian Economics and its derivatives are little more than the Economics of Illusions, but it appears that those illusions have been so pervasive and obviously persuasive that few in their ranks question its validity. The concrete proof of the illusionary nature of these economic theories is the economy itself; it is the product of such nostrums. As such, it is impossible to believe that based on the illusionary nature of these theories and the application of those theories that a healthy economy can be produced by the policies that emanate from them. It the assumption is incorrect, the results of those assumptions will also be incorrect.

Contrary to those who are following closely in the footsteps of Keynes and his theoretical descendants, it is impossible to have underinvestment in free markets, additionally if they seek a remedy for unemployment they need look no further than to a return of free market labor and the removal of trade barriers, which, by the way, includes the so-called free-trade agreements which are nothing more than managed trade.

There is no alternative, for as we are seeing this government is following a well-beaten Keynesian path toward even further dislocation. It is absurd to believe that this government, by utilizing the same type of policies that created this economic dislocation, can, by simply enlarging those polices, cure the economic ailments that this country now suffers. The government is once again embarking on yet another easy-money policy to solve the problems that easy-money polices cased.

Unemployment cannot be cured by such actions; perhaps I should say that employment, productive economic employment, cannot be created by such actions. The government is once again traveling down the expedient road that will ultimately lead absolutely no where. Thus is will only perpetuate and in the process only aggravate the very problems it seeks to solve. Eventually, these forces will converge into a situation that is completely beyond the control of any policies, but for some reason those in our government are blinded by the idea that although the solution they are seeking to implement has been the source of the problem that maybe it will work this time if we throw much more money at it; the results will be catastrophic.

Decades have proven that Washington, D.C. is filled with weakness and immense amounts of bad judgment; as well as political officials who are willing to yield to various influences that are far from beneficial to this country and its People. Perhaps the circumstances faced by this country will finally awaken the People to the reality that they now find themselves and in the process the People will once again place demands for real responsibility on every level of government.

In Liberty and Eternal Vigilance,
Republicae