Brains Not Included

Cracked Up, Whacked Out and Completely Out of Control

Keynesian Kooks – Why Keynesian Theory Doesn’t Work

KeynesianWhose Theory is This?

Keynesian Theory was developed by John Maynard Keynes, a man who would eventually have the royal title of Duke bestowed upon him in England.  Born in 1883, he came to prominence as an economist and philosopher around the time of The Great Depression. 

 His theories were adopted by the government in England in the late 1930’s and were eventually adopted by the Americans towards the end of World War II.  Essentially he believed that government could and should control capital in order to abate the swings in unemployment that can be typical in capitalist economic systems.

His theory basically states that high rates of savings by the population should be discouraged because those rates of savings hamper growth.  He also believed that supply drove demand not the other way around.

One of his largest critics was Milton Friedman who believed there were some basic flaws in Keynes theory.  One of the things that bothered Friedman the most was that much of Keynes economic themes were based on his feelings or his philosophy and had very little to do with actual mathimatical formulaic proof.

Friedman actually disproved Keynes theory that supply created demand and proved mathematically the opposite was in fact true.

What is the Keynesian Theory of Economics?

Simply put, Keynesian theory states that government can place capital more efficiently than the private sector.  When government controls capital and directs its placement through taxation and heavy regulation or through deficit spending, then swings in economic cycles are flattened and full employment is brought into equilibrium for long periods of time.

It further hypothesizes that high savings rates are unsafe and destabilize the economy and that only low savings rates and high rates of spending by the population can sustain growth and fuel stable economic cycles. 

Therefore, when the public is saving in large numbers, the government must encourage spending through regulation and if government cannot encourage spending then it should tax heavily in order to put the saved money to work in the economy.

Why Keynesian Theory is Still a Theory

Keynesian Theory is still a theory because it’s never been proven to work.  While America embraced Keynesian Theory in the lat 70’s under Nixon and Carter, the British were quickly squeezing the vestiges of this failed theory out of their government.

Theories remain theories until they are proven at which time they receive the title of Rule or Law.  We don’t call it a law because the theory’s concepts have failed time and again.  If it worked we would call it a Keynesian’s Law or the Keynesian Rule.

Milton FriedmanCommon Sense Shows Us the Way

Think about the two basic tenants of Keynesian Theory.  1.)  That saving is bad and; 2. )  That capital in the hands of a few (the government) is better than the profit motive of capital in the hands of many.

Instinctively we know that having savings is good.  ‘Save for a rainy day’… ‘Neither a beggar or a borrower be’…  ‘Waste not, want not’…  All of these wise old sayings are telling us something.  SAVE FOR A RAINY DAY!  Saving is a good thing.

Next lets take a look at human nature.  How good would a person have to be if you put millions, billions or even trillions of dollars in their hands and said, this doesn’t belong to you but you have complete control over it? 

Now the rules say this person can’t use their emotions in deciding what to do with the money and they can’t let their personal opinions play on their decisions, but…  How does this person or these few people in control that kind of money keep their own human nature in check? 

They don’t, just look at the Marxist utopia that should have bloomed from the Bolshevik revolution.  Instead of Utopia we got the USSR.  Socialism and Communism are the end result of basic Keynesian Theory.

Friedman Got It Right

Milton Friedman used mathematics to prove his economic theories and to disprove Keynesian Theory.  While Keynesian approached economics from the viewpoint of philosophy first and mathematics second, Friedman comes at from the other side.

While the Keynesian experiment was all the rage in Europe and was being put into practice in the U.S.A., Friedman was being decried by his piers for his opposition to this ‘enlightened’ economic theory. 

But, armed with the mathematical facts and penchant for philosophy himself, Friedman was able to write one of the greatest books of all times.  Capitalism and Freedom is a must read for anyone that wants to understand why Capitalism works and how it creates freedom.

We can try Keynes ideas one more time, but doesn’t make more since to turn to the logical rules that are proven and documented for us by Friedman?  Capitalism may give us some ups and downs in our economy, but it is still the worlds last best chance for strong free societies where people have an opportunity to live free from tyranny and where people are free to live their lives as they see fit!


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Cheney Report to Clear Bush

biden-reportImagine the headline: Cheney: Report to Clear Bush.  ABC, NBC and CBS reporters would blow their stacks.  AP and Reuters would pontificate about the how the report was biased and couldn’t be trusted.  Members of congress would demand a special investigator!

Now enter this headline:  Biden: Report to Clear Obama.  ABC, NBC and CBS reporters are reporting that the report is factual and a ‘relief’ to the Obama campaign.  AP reporters are writing articles that Obama won’t have to cut his Hawaiian vacation short because there was no wrong doing by he or his staff.  Why the difference?

The difference is because the supposedly unbiased press is not so unbiased.  Unbiased reporting would mean simply reporting the fact that Biden had conducted the internal report.  Then they would go on to explain that the report is biased being as it was produced by Obama’s team and then they would point out that a biased report of this nature means nothing.

My point here is not to accuse or besmearch Obama or his team in any way.  I don’t know whether he was part of the pay to play scheme of Blago up in the mean streets of politics in Chicago or not.  Wrong doing or not is not the point here.

The point I’m making is about the supposed unbiased media.  They are NOT unbiased at all.  While I think that Rush is way, way to far rigth of center and at times Sean Hannity makes Rush look like a Lib, at least with these commentators, you know what you are getting …COMMENTARY!

With the talking heads at the major media outlets we are getting commentary disguised as unbiased news.  No wonder political corruption has proliferated for so long in Chicago.  If you are of the proper political persuasion, you get a pass from the ‘unbiased’ media….

By The Way:  The facts are that the report to clear Obama and his staff …you know the report that is being reported on… Obama’s staff hasn’t even released the report yet because they’ve been asked not to by the FBI.  So all the reporters writing articles about how the investigation conducted by Obama’s staff clears Obama and his staff haven’t even seen the reporters yet!  Madness!

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A Head On Collision

Many people don’t like it when politicians argue and accuse.  They wish for a more story-book setting where we all get along and nobody slings mud.

Well it’s time to to wake up!  Our political history has been fraught with conflict.  Today’s political environment is much tamer that our past.  Remember the days of Burr and Jefferson.  The days when you could win a senate seat by winning a duel?  The days when a fist fight was likely to break out just outside the doors of congress?

Yes, the arguments flowing over the airwaves in today’s public discourse are much tamer and are very necessary.  The Press has always been ‘in the tank’ for one candidate or the other and the only way to get the public to wake up and look at both candidates evenly is to sling a little mud.

This campaign season is no different.  This year we have two virtual unknowns, one is a VP candidate and other is a Presidential candidate.  However the press has vetted the VP candidate much harder than the other sides Presidential choice.  This was the complaint of his opponents in his primary and it is still the complaint today.

Finally, the Republicans have got the message.  They must sling a little muck and get a little dirty to wake up the electorate.  Nobody wants to get dirty but it’s tough to stay clean when your opponent constantly slings mud, obvuscates the truth and is never questioned by the press.

Kudos to McCain for finally getting it!  I believe in no small part, this change in strategy is due to the popularity amoung the base for his VP candidate.  Hopefully the attacks will keep coming because there is so much the electorate doesn’t know about the Democratic nominee.

1.  Did you know that John McCain DID lead the way on the attempt to regulate Fannie Mae and Freddie Mac, the two main causes of our current economic crisis?

2.  Did you know that one of the largest contributors to the Obama campaign were these two organizations?

3.  Did you know that is was the Democrat party that blocked tighter regulation of Fannie and Freddie as far back as 1995.  Even President Clinton stated in a recent interview that he wanted tighter regulation of Fannie and Freddie but he was blocked by his own party?

4.  Did you know that Barney Frank, the lead Democrat on the committee in charge of overseeing banking regulation stated that there was no problem with Fannie and Freddie and accused the republicans of tyring to squelch affordable housing?  (Why is this man still in charge of that committee, he should be castigated with all the CEO’s that went along with this crap!)

5.  Did you know that Senator Obama had a chance to vote for heavier regulations and chose to vote present instead?

There is a lot to know about this man who appears to have become the defacto leader of our great nation.  With early voting going on all around the country and with people and corporations with their hands outstretched and willing to vote for the politician that will give them the most, it is time for a little mud slinging. 

It is time for the electorate to wake up and for Obama to answer the hard questions.  Then maybe we can all have the information that we need to make an informed decision about who our next leader will be.

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