Monday, October 27, 2008

Keynes is back

We now face Keynesian conditions and need truly Keynesian solutions

"This has raised a hornets’ nest of controversy, with people holding forth with much sound and fury – and often signifying nothing." Nothing like that here of course.

Posted by letthemfall @ 05:03 PM (973 views)
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9 thoughts on “Keynes is back

  • The big problem with Keynes is that his paper was published in 1936 when Britain lead the world as a manufacturing nation. Infrastructure investments would have involved British companies using british vehicles, British machine tools and British construction equipment, sadly in our globalised economy we would now see very little benefit other than employing a few brickies, electricians and plumbers as most of the big ticket items would be of overseas origin.

    Keynes and Keynesian economics should be placed firmly in the dustbin where they belong, a mid 20th century solution is not a 21st century one. Keynes missed the mark as he was after the Wall Street Crash and usurped by WW2; we are in uncharted waters and need a new solution.

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  • I disagree enuii [with the greatest respect!] In my humble opinion, Govt should indeed borrow to stimulate economic activity, spending on interest rather than on welfare benefits…but in answer to your point, invest in new and emerging industries such as new energy technologies, plastics substitutes and so on. We have the expertise, let’s turn this crisis into opportunity by investing in and building the industries of the 21st century, ready for when we emerge from this downturn.

    On the other hand, you have a point regarding these conditions being unprecendented. But there few options. Spend or don’t spend. I’ve always had a respect for the idea of worker cooperatives working within a free market context..but that’s probably a luxury that may be able to emerge in the longer term. In the meantime, it has to be Govt spend [invest] or Gov’t pay unemployment benefit. Spend either way…may as well borrow and take the positive route, the proactive route rather than the reactive one.

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  • A combination of government control over interest rates and loose monetary policy causes slumps and government attempts to spend our way out of slumps makes them worse. Both sets of actions, taken together, causes capital to flow uphill.

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  • The government couldn’t invest it’s way out of a wet paper bag, we would as a nation end up in even a bigger mess with nothing to show for it. Too many people in this country expect a cushy desk based job with most of our 20 somethings not having a clue what hard day’s work is about. The other problem is simply that our university graduates are not of the right type or calibre to work in 21st century industries even if the government knew what they were. Wage expectations are another problem as this country is simply too expensive to live in when compared to Asian economies, an elite few employed by top tier technology companies may do alright but the vast majority won’t. As others have mentioned before, living standards are going to plummet in this country along with the service and consumer debt based economy.

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  • “4. enuii said…
    The government couldn’t invest it’s way out of a wet paper bag, we would as a nation end up in even a bigger mess with nothing to show for it. ”

    Not true enuii – I’m thinking millenium dome. Errmm…

    There must be something else

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  • Keynes theory did not work in the 1930s nor would it work now. Unemployment levels in the US just before the 2nd WW was still staggerring high and the country was starving. What saved the US from prolonged depression was the 2nd WW, when they first came to help the British by sending food and weapons from 1940 and from 1942 when they had to defend themselves after Pear Harbor.
    When economies are over indebted like ours are at the moment, keynesian policies will not work either. By distorting the market they will prolong the agony. As much as K marx theories proved to be inaccurate, Keynes economic model was fondamentally flawed and should be binned.

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  • last_days_of_disco says:

    I think there is hope, but people are going to have to accept big changes in their quality of life. life expectancy, etc.

    We must strike at the heart of darkness, refuse any form of benefits. That would be such a radical position. It would be more
    noble to starve than take benefits from the state. Refuse their Keyensan trap and make it socially unacceptable to take benefits from the state for others. That way the state would be forced to do the honest thing, cut taxes and get rid of the leaches and give us back our country to run ourselves, even if we make a stuff up, at least we did it ourselves and not some shadowy elite.

    I am not sure if this is a leftie or a right wing position, but faced with the disgusting spectacle of these guys socializing the banks losses, what other options are there?

    And once we have gained true control of our government, and have learnt how to be self reliant through suffering, then we will be able to deal with the banks with authority and they will become our servants not our masters.

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  • planning4acrash says:

    Keynes is here with vengeance. He believed in printing fiat money to deal with a downturn. He would have been proud of the Paulston Ponzi $700bn takeover scheme. Keynesian theory was the cause of the Great Depression lasting 15yrs. It is the cause of the elongation of the Japanese deflationary slump. It is great for those who want to keep down the middle class and maintain control. Rubbish for the rest of us.

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  • All this talk of Keynsian pump priming the economy is a bit moot really. We are on course to have to borrow £65bn this tax year (08/09) which is entirely to fund our current level of expenditure, most of which is wages/benefits. Very little true investment in any real sense of the word (ie putting money in now = more money out later). The PSBR will rise even more, due to lower tax takes, and higher benefit spending, to probably £100bn+ by 2010/11 unless action to raise taxes and lower spending is taken. All this is BEFORE any extra spending on ‘infrastructure’ is even considered. What would the borrowing requirement be then? £125bn? £150bn? This just cannot happen for practical reasons. The pound would be in freefall, long tem interest rates would be through the roof. The cost of borrowing that much would be astronomical. All this Keynsian talk is hot air. If the amount of money the govt spends now doesn’t boost the economy, another 10% extra won’t either. It’s just politicians unable to comprehend that the problem we are in is so huge that there is little to nothing they can do to solve it. The best they can do is keep the lights on, keep law and order in the streets, and hope for better times at some point in the future.

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