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Edit: I am not the author of this piece, I am merely sharing it. New to the diaries, not to DK. Longtime fan and when I read this I wondering what a wider sample would respond; specifically, economically.

How do you respond to this criticism of progressive economics?
Credit: Brett MacDonald

To those of you talking Economics, Take a look:

You see an accumulation of wealth at the top because smart people made a lot of money legitimately then invested it wisely with other smart people that had the know how...bankers. Keynesian Economics is not the solution. Federalizing the government as described in the Constitution and Explained in the Federalist papers is the solution. This will be an economics discussion, not a federalist one.

These people also were rich. It is not more difficult to become as rich as the rich people of today, that is a myth.

The rich people who you speak of are not collecting a paycheck at the expenses of the American People. That is a myth.

Besides for Goldman-Sachs. They are evil. That isn't a myth.

But otherwise, the Bill Gates and Richard Bransons of the world, even the Koch brothers and Steve Burke are not the evil robber barons you portray them as. The issue is politically systemic not economic mishaps!

Keynesian economics is basically the last resort of all Banana republics and can be divided into three categories of government intervention into the market economy:

(1) Direct Expenditure: This was the form that Keynes believed was ideal, government expenditure directly in the market to create jobs. Some Keynesians (Keynes is actually believed to had said something to this effect as well) have gone so far as to claim that the government paying a man to fill a hole one day and pay him to dig it back up the next was still an effective economic stimulus. The goal is to inject cash flow into the economy to encourage spending.

[Keynes' source of this money injection into the economy? Bond Sales and Quantitative Easing]

(2) Quantitative easing is best explained by the video in brackets just beneath this bullet point, it's clear, concise and entertaining I highly recommend it. Essentially, money must be printed to be injected into the economy. Well since that money has to come from somewhere enter the economy from somewhere, enter the Fed, the Banking System, and the general global population. (B) This also occurs when the federal reserve loans new money to banks which actually creates debt.

["Quantitative Easing Explained" - http://cur.lv/... ]
["Bank Bailouts Explained" - http://cur.lv/... ]

(3) Bond are sold through the federal reserve. Often times they are sold to banks in this country, other times they are sold to foreign governments...like China. Govt bonds are micro loans with a fixed expiration date and commission. More or less its like buying stock in a government's dollar, where instead of being at the whim of NASDAQ influences, the idea is you have the security of a Government. Now, without getting into credit ratings and other details that will detract from the general argument, when you allow a nation like China to buy your bonds, you are basically printing money and adding new income to the money supply. You are also strengthening the Chinese dollar. Enough of this.

A fiat currency is fine. But limitless printing and money supply manipulation is an incredibly bad decision in the long run and in the short run. It leads to a duct-tape solution that holds back the temporary ebb of recession in the mid game but its never sufficient enough for a real recovery and the money never efficiently reaches the hands of individuals.

---------------

Consider a couple of the bailouts -- What exactly is different in Kenyesian Economic theory from the typical trickle down theory? Today, Keynesian economics has come to mean bailouts are for banks and corporations.

Other bailouts are more in the spirit of what John M. Keynes imagined -- Direct government expenditure and a lot of the highway renovations happened because of Obama and Bush's stimulus packages. Some are too direct like the Bush tax rebate. Both of these methods fail.

Direct expenditure does not create real wealth. (A) Wealth cannot be created (we will get to this in a minute).

Direct expenditure favors a group, typically unions or a specific contractor, and does not actually create jobs. It just gives more work to people that have jobs already for the most part.

Sure there is some expansion, but not much. The jobs that it creates are like the dollar that was used to create them -- inflated, like the money supply itself.

When the government expenditure ends, and it always ends, times are temporarily good (if the money pump was done to a necessary extent). But what follows is a recession caused by the inflation of the dollar value and the debt that is inevitably created by bailouts, bond sales, and direct expenditure.
-------------------

Proofs

(A) Wealth cannot be created -- What I mean by this is that, despite what some may tell you in the Economics realm, the Conservation of Matter still applies. All the shit that exists today (the material), even people, are what is real wealth. It is a fixed unknown number.

And if you are not a believer of what I just said I endeavor to convert you to the light of Austrian economics, TRY THIS THOUGHT EXPERIMENT:

<>

The answer is a net loss. Consider this: Before removing the Gold Standard or whatever monetary system was at play prior to your rise to power, there was some form of wealth and wealth storage. Some currency preceded your own, your highness. Let's pretend that this was a neutralized currency (as opposed to centralized) and that it was backed in Gold and finite. We will call it the 'Real Wealth'. When you stepped on stage and regulated the commerce policy, you created a new fiat currency. Upon loaning it to banks you did something particularly interesting. You set them up for failure. If you are the sole creator of money and your loan was the Genesis loan, you didn't create a net gain but a net debt. Does that make sense?

If as my creditor you loan my bank 100 dollars and ask for a quarter percent return in 5 months, I cannot give you any more than at most the 100 dollars you loaned to me, there isn't any more money, I only have what you created.

Now, Obviously this is not the way things work in the real world. And for good reason too. When we removed the gold standard we had already generated quite a bit of 'Real Wealth' that was of value. Removing the gold standard is not the issue, printing money is the issue. Once we began printing money that was not backed by a finite resource and began loaning it out to banks at an interest rate (no matter how close to zero) the banks and the American populace will slowly see the Real Wealth (measured by the strength of the Dollar on the Gold Standard) deteriorate.

[Broken Window Fallacy -- http://cur.lv/... -- A good video on the way to look at economic logic]

(C) What does create jobs and generate wealth? Ingenious start ups. Ingenuity alone. Hard work. Captains of Industry. Supply and Demand. Free Markets. Collective Rights of both Employers and Employees. Balance of Counter Ambition.

But never Government Intervention.

I do not believe in the Gold Standard but I do believe in a finite money supply that is divided beyond the first two decimal places. Essentially I support crypto currency as a viable alternative.

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Comment Preferences

  •  Wealth cannot be created (6+ / 0-)
    Wealth cannot be created -- What I mean by this is that, despite what some may tell you in the Economics realm, the Conservation of Matter still applies. All the shit that exists today (the material), even people, are what is real wealth. It is a fixed unknown number.
    Much of what constitutes "wealth" today is not matter - not material.  Intellectual property is just one example.  Wealth is created every day by those who are creative and share their creativity with others.

    An illusion can never be destroyed directly... SK.

    by Thomas Twinnings on Mon Feb 03, 2014 at 11:37:38 AM PST

  •  We Climbed Out of Depression, Won World War, (11+ / 0-)

    created history's only ever large middle class, become global superpower under Keynesian economics or at least some of its major principles.

    It's only as we've pulled government back in recent years relying more on less regulated corporations that we've been trending toward banana republic.

    BTW I don't think bailing out big rich banks and not increasing government hiring in a crash is Keynesian but I'll defer to those who are informed in detail.

    You've got a long list of assertions here. Is there a country that's doing well being run your way?

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Mon Feb 03, 2014 at 11:50:26 AM PST

  •  Well, I'd call bullshit, mostly (7+ / 0-)
    What does create jobs and generate wealth? Ingenious start ups. Ingenuity alone. Hard work. Captains of Industry. Supply and Demand. Free Markets. Collective Rights of both Employers and Employees. Balance of Counter Ambition.

    But never Government Intervention.

    Right. Because all those defense contractors got rich on their own.  And ADP didn't get rich doing payroll and printing checks for the government. And those Internet companies run on a network set up entirely by private investment and originated by a bunch of private firms coming together.

    The examples that contradict this are legion.

    "Don't be defeatist, dear. It's very middle class." - Violet Crawley

    by nightsweat on Mon Feb 03, 2014 at 11:50:32 AM PST

    •  As Nero Wolfe once said (4+ / 0-)

      "Well, go on. I never answer questions containing two or more unsupported assumptions."

      Heh.

      I tried to go online to find a similar bear head...but when I searched “Big Bear Head” it gave me a San Diego craigslist ad entitled “Big Bear needs some quick head now” and then I just decided to never go on the internet again.--Jenny Lawson

      by SouthernLiberalinMD on Mon Feb 03, 2014 at 12:36:06 PM PST

      [ Parent ]

    •  Or this is another, more oblique answer (7+ / 0-)

      to these crap economic theories:

      by Lemony Snicket

      Thirteen Observations made by Lemony Snicket while watching Occupy Wall Street from a Discreet Distance

      1. If you work hard, and become successful, it does not necessarily mean you are successful because you worked hard, just as if you are tall with long hair it doesn’t mean you would be a midget if you were bald.

      2. “Fortune” is a word for having a lot of money and for having a lot of luck, but that does not mean the word has two definitions.

      3. Money is like a child—rarely unaccompanied. When it disappears, look to those who were supposed to be keeping an eye on it while you were at the grocery store. You might also look for someone who has a lot of extra children sitting around, with long, suspicious explanations for how they got there.

      4. People who say money doesn’t matter are like people who say cake doesn’t matter—it’s probably because they’ve already had a few slices.

      5. There may not be a reason to share your cake. It is, after all, yours. You probably baked it yourself, in an oven of your own construction with ingredients you harvested yourself. It may be possible to keep your entire cake while explaining to any nearby hungry people just how reasonable you are.

      6. Nobody wants to fall into a safety net, because it means the structure in which they’ve been living is in a state of collapse and they have no choice but to tumble downwards. However, it beats the alternative.

      7. Someone feeling wronged is like someone feeling thirsty. Don’t tell them they aren’t. Sit with them and have a drink.

      8. Don’t ask yourself if something is fair. Ask someone else—a stranger in the street, for example.

      9. People gathering in the streets feeling wronged tend to be loud, as it is difficult to make oneself heard on the other side of an impressive edifice.

      10. It is not always the job of people shouting outside impressive buildings to solve problems. It is often the job of the people inside, who have paper, pens, desks, and an impressive view.

      11. Historically, a story about people inside impressive buildings ignoring or even taunting people standing outside shouting at them turns out to be a story with an unhappy ending.

      12. If you have a large crowd shouting outside your building, there might not be room for a safety net if you’re the one tumbling down when it collapses.

      13. 99 percent is a very large percentage. For instance, easily 99 percent of people want a roof over their heads, food on their tables, and the occasional slice of cake for dessert. Surely an arrangement can be made with that niggling 1 percent who disagree.

      I tried to go online to find a similar bear head...but when I searched “Big Bear Head” it gave me a San Diego craigslist ad entitled “Big Bear needs some quick head now” and then I just decided to never go on the internet again.--Jenny Lawson

      by SouthernLiberalinMD on Mon Feb 03, 2014 at 12:41:39 PM PST

      [ Parent ]

    •  ...and Walmart doesn't profit mightily from food (0+ / 0-)

      stamp grocery sales in their stores, and paying a wage so low that the taxpayer has to subsidize their workers...

      You can't make this stuff up.

      by David54 on Mon Feb 03, 2014 at 01:25:59 PM PST

      [ Parent ]

  •  I'm not really interested in (10+ / 0-)

    debating economics when the proof of trickle down economics is playing out before our eyes.  Huge inequality, banks getting bailouts, while Main St gets screwed over.
    Government can't create wealth? Talk to Cheney about that and about all his contracts for Halliburton during the Iraq war.

    Your beliefs don't make you a better person. Your behavior does.

    by skohayes on Mon Feb 03, 2014 at 12:05:49 PM PST

  •  Just where did you study economics, anyway? (7+ / 0-)

    This is a rehash of - well, a rehash. Are you sure you didn't mean to post it somewhere more, um, Conservative?

    I mean, Milton Friedman was a nice guy - I was at his son's wedding - but what does that have to do, as we used to say, with the price of tea in China?

    At least half the future I've been expecting hasn't gotten here yet. Sigh.... (Yes, there's gender bias in my name; no, I wasn't thinking about it when I signed up. My apologies.)

    by serendipityisabitch on Mon Feb 03, 2014 at 12:10:58 PM PST

    •  Where? Clearly in an Ayn Rand novel, (1+ / 0-)
      Recommended by:
      serendipityisabitch

      followed by some pursuing of Wikipedia and a few web sites dedicated to the preaching of Libertarianism. Given the writing style and - ahem - the depth of thought, I'd peg the diarist to be 16 or 17 years old. If he's actually younger I'd say, "Congratulations. Not a bad try for a tenth grader. And don't worry, you'll outgrow Rand and Libertarianism soon enough." If he's older than 18 I'd say, "Poor dear. You need to get out more. Make some new friends, go out on dates, have a real love life."

      "Some folks rob you with a six-gun, some rob you with a fountain pen." - Woody Guthrie

      by Involuntary Exile on Mon Feb 03, 2014 at 01:06:58 PM PST

      [ Parent ]

  •  Francisco is that you? Mr. d'Anconia, did you (6+ / 0-)

    somehow escape your fictional world?  

    We don't make up one-dimensional characters that invent perpetual motion machines or other nonsense, so go back to John Galt where you can pretend together the world works as you think.  

    Then again, there's always Sponge Bob.  Maybe your world could exist in such a cartoon.  

  •  Citizencheney, I recd your diary because it was (0+ / 0-)

    carefully written and contained some interesting points.  However if you wish to become a member of this community you should lurk and listen for a while before posting a controversial diary.  People who come here to "straighten out our thinking and show us the light" generally are not well accepted.  
    I hope you take this in the spirit it is meant.

    Rivers are horses and kayaks are their saddles

    by River Rover on Mon Feb 03, 2014 at 12:37:44 PM PST

  •  Paul Krugman and Brad DeLong, (4+ / 0-)

    if read with an open mind, will cure you of your infatuation with Austrian economics.

    Shalom v' salaam; peace and wholeness

    by another American on Mon Feb 03, 2014 at 01:02:03 PM PST

  •  Keynes didn't recommend constant deficit (6+ / 0-)

    spending, just in economic downturns to be made up in the good times (as we had under Clinton when we actually paid down the debt a bit).
    Keynes was also an astute investor who made a fortune in the markets and helped his friends manage their investments, too, long before a whole industry sprang up to 'help' people.
    Out deficit spending has mostly been due to crazy defense spending...how blowing things up in other countries is supposed to benefit anyone's economy is a mystery.

    Armed! I feel like a savage! Barbarella

    by richardvjohnson on Mon Feb 03, 2014 at 01:06:08 PM PST

  •  most of the richest people got their money the (4+ / 0-)

    old-fashioned way----they inherited it.

    (shrug)

    In the end, reality always wins.

    by Lenny Flank on Mon Feb 03, 2014 at 01:41:55 PM PST

  •  citizencheney, will you please round up the Koch (0+ / 0-)

    bros, a bunch of Lord Bankfiends, some defense company ceos, and 100 or so randomly picked billionaires from a Davos cocktail party and go hide until we beg you all to come back?

  •  Dreck (1+ / 0-)
    Recommended by:
    skohayes

    You need better sources.  The entire Brett MacDonald excerpt consists of unsupported, erroneous assertions.

    Iron sharpens Iron. Normal is a dryer setting. STOP illegal immigration NOW! -- Make it LEGAL. If Corporations are People--Let's draft them.

    by benamery21 on Mon Feb 03, 2014 at 04:11:30 PM PST

  •  Maybe read primary/secondary sources (1+ / 0-)
    Recommended by:
    skohayes

    Disingenuous tripe by dupes who don't even understand the tropes they are peddling is not the best source of intellectual clarity on this subject.

    Iron sharpens Iron. Normal is a dryer setting. STOP illegal immigration NOW! -- Make it LEGAL. If Corporations are People--Let's draft them.

    by benamery21 on Mon Feb 03, 2014 at 04:19:32 PM PST

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