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Old Dec 18th 2013, 08:15 AM
Tom Palven Tom Palven is offline
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Default Economics: A Very Brief History

Economic decisions have existed since cave people began determining how much meat or berries were worth a spear point or arrowhead. Somewhere along the line they discovered that if some people speciailized in making arrowheads and traded for meat, and vice-versa, that both groups could profit from the exchanges, each having more food, raising their standard of living.

Various media acted as money to facilitate exchanges of goods and services, including arrowheads, stone beads, salt, and metals. Most civilizations settled on metals as mediums of exchange, including gold, sillver, and copper. In 1776 a Scotsman named Adam Smith, usually considered to be the father of the science of economics, described how economic exchanges took place in his book The Wealth of Nations.

Smith noted that economic activities taking place in the British Isles, people supplying meat and vegetables, lumber, insurance for cargo on ships at sea, etc, were guided by a kind of spontaneous order. He said that it was if an "invisible hand" decided how many people became bankers, lawyers, farmers, and so on, and how much of such commodities as wheat or turnips were produced.

He noted that while "restraint of trade" like the tariffs or import quotas on foreign goods such as wool and textiles desired by farmers and trade unions, might allow those special interests to to increase their profits, but by reducing the benefits of specialization and trade, protective measures reduce the wealth of societies as a whole, ie, reduce the "wealth of nations." In arguing against government intervention in economic activities, Smith was essentially arguing against macroeconomics, although that term had not yet been invented.

Modern macroeconomics, the theory that governments should manipulate taxing and spending policies in order to create thriving and stable economies, is often credited to John Maynard Keynes (1883-1946), who is widely described as the Father of Macroeconomics. His books include The End of Laissez-Faire (1926).

In 1971 when President Richard Nixon took the US dollar, the world's reserve currency, off what remained of the gold/silver standard, he is reputed to have said "We are all Keynesians now."

The removal of the US dollar from the discipline of the gold/silver reserve requirement allowed for easy expansion of US government spending. Easy money and an easy-money attitude may have facilitated the creation of banking innovations such as derivatives and the explosion of federal, state, and local bond issues backed by the full faith and credit of such entities as the Federal Reserve, Detroit, Los Angeles, etc.

In the forty years since Nixon declared us to be Keynesians the US has run up huge budget deficits made even larger recently by "economic stimulus packages," and has resorted to "quantitative easing" (formerly called "currency debasement") printing money to try to get the economy "moving again," besides raising money by selling bonds (IOUs) to people who are not Keynesians, including you, me, and the Chinese government.

Mainstream economists in the US blame Bush policies, Obama polices, the voters, Congress, 9/11, Hurrican Katrina, global warming, and other things for US economic stagnation, but Keynesian macroeconommics remains a Sacred Cow, and gets none of the blame. We are told that the problem is that we need more of it. More taxes and more spending. Eventually, we might begin to wonder whether Adam Smith's advice wasn't better than the advice of economic planners plodding toward a central command economy.


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Old Dec 18th 2013, 08:29 PM
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Default Re: Economics: A Very Brief History

I love the smell of troll-bait in the morning...

This is a particularly lovely example. Shall I desconstruct it for you? That's why you posted it isn't it?

Btw, I'll assume you didn't write it because it was written by someone well practiced in the art of deception - and you did indent the text, indicating that it was a quotation.

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Originally Posted by Tom Palven View Post
Economic decisions have existed since cave people began determining how much meat or berries were worth a spear point or arrowhead. Somewhere along the line they discovered that if some people speciailized in making arrowheads and traded for meat, and vice-versa, that both groups could profit from the exchanges, each having more food, raising their standard of living.
While it is certainly true that economic decisions have existed since cave people lived in caves, people really didn't 'discover' the principle of economic specialization and exchange until Adam Smith wrote about it in the late 18th century.

Inter-tribal trade in the 'prehistoric' period existed, but it was always about exchanging luxury goods or symbolic goods - it never involved trading basic items of food for consumption, and there is no such thing as a prehistoric tribe specializing in the manufacture of arrowheads and trading with some other tribe for food.

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Originally Posted by Tom Palven View Post
Various media acted as money to facilitate exchanges of goods and services, including arrowheads, stone beads, salt, and metals. Most civilizations settled on metals as mediums of exchange, including gold, sillver, and copper. In 1776 a Scotsman named Adam Smith, usually considered to be the father of the science of economics, described how economic exchanges took place in his book The Wealth of Nations. Smith noted that economic activities taking place in the British Isles, people supplying meat and vegetables, lumber, insurance for cargo on ships at sea, etc, were guided by a kind of spontaneous order. He said that it was if an "invisible hand" decided how many people became bankers, lawyers, farmers, and so on, and how much of such commodities as wheat or turnips were produced.
Btw, just because something looks like an invisible hand at work, doesn't mean that there is an actual invisible hand at work.

And those people doing all that supplying were not guided by any kind of spontaneous order. They were all guided by a combination of their own self-interest, material opportunity, encouragement by elite capitalists and general cultural training to do exactly what they were doing. Nothing mysterious or otherworldly about it.

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He noted that while "restraint of trade" like the tariffs or import quotas on foreign goods such as wool and textiles desired by farmers and trade unions, might allow those special interests to to increase their profits, but by reducing the benefits of specialization and trade, protective measures reduce the wealth of societies as a whole, ie, reduce the "wealth of nations." In arguing against government intervention in economic activities, Smith was essentially arguing against macroeconomics, although that term had not yet been invented.
I'm not arguing with Smith here. I'm arguing with whoever thinks that import or export tariffs on foreign wool and/or textiles originated from anyone except the largest producers of domestic wool and/or textile manufacturers. The history of import and export taxes on wool and textiles is generally well documented and in England in particular, comprehensive records are available going back to the 12th century and there is no sign of any farmers or trade unions involved in the process of creating, collecting and/or continually increasing import duties and export taxes. That was a game played by exclusively by kings, parliaments, landowners, banker-financiers and wool dealers (the last two were often the same people).

It is to be noted that wool production, cloth-making and wool-export have historically been the basis of the whole English economy and a primary source of English wealth and prosperity for a thousand years, so this isn't just some minor or obscure sector of the economy.

Someone is taking a 20th century ideological position of anti-unionism and projecting that back hundreds of years to support an argument about the origin of [protectionist] import/export customs? That just doesn't stand up.

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Modern macroeconomics, the theory that governments should manipulate taxing and spending policies in order to create thriving and stable economies, is often credited to John Maynard Keynes (1883-1946), who is widely described as the Father of Macroeconomics. His books include The End of Laissez-Faire (1926).
Wow.

The anti-Keynesian tone there is subtle but it is the same old rightwing/Austrian/Randian spin.

Keynesian theory of counter-cyclical stimulus spending policy is predicated upon the evidence that capitalism is prone to a continuous cycle of boom and bust. That repetitive cycle of boom and bust is materially and morally damaging to the fabric of society and human lives. Keynesian economic policy is designed to mitigate some of the damage to society caused by all the bust cycles, yet still permit capitalism the freedom and liberty to continue along with boom-bust cycles and invisible hands forever. This is essentially a 'win-win' situation for both capital and human beings.

And the reason that rightwingers, goldbugs and capitalist ideologues hate Keynesian theory so much is because it is based on the principle that capitalism is prone to a never-ending cycle of boom and bust. This is considered heresy or blasphemy to the ideologically pure people of the Ayn Randian variety, and thus, we get holy war against Keynesian theory.

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In 1971 when President Richard Nixon took the US dollar, the world's reserve currency, off what remained of the gold/silver standard, he is reputed to have said "We are all Keynesians now."
That Nixon was an ass is already a well established proposition.

That the statement is "reputed" suggests that the source more likely originates with one of those rightwingers, goldbugs and capitalist ideologues that are so obsessed with the US Federal Reserve, anti-Keynesianism and specie-hoarding rather than Nixon - who was obsessive about tape-recording everything. If Nixon said it, we'd likely have it on tape, in which case it wouldn't be "reputed".

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The removal of the US dollar from the discipline of the gold/silver reserve requirement allowed for easy expansion of US government spending. Easy money and an easy-money attitude may have facilitated the creation of banking innovations such as derivatives and the explosion of federal, state, and local bond issues backed by the full faith and credit of such entities as the Federal Reserve, Detroit, Los Angeles, etc.
The so-called "discipline of the gold/silver reserve requirement" is a figment of the ideological imagination. Any law made by man can be unmade by man at any time - and will be. It is also to be noted that currency inflation and asset bubbles (Dutch tulips & South Sea Company) have been around for hundreds of years - using specie-based currencies. One can argue that inflation and asset bubbles were even more common prior to the establishment of central-reserve banking (this is of course debateable just because all historial arguments are).

That is to say, in the history of money spanning thousands of years, there is no evidence in any way shape or form that a specie-based currency is any different or inherently more stable than a non-specie-backed currency.

The only real difference is all about the goldbugs who hoard gold expecting non-specie-based currency to crash and make them super-rich. Those people really, really want to see the end of reserve-banking, so they all talk about the dangers of hyper-inflation and the evil of central banks. Repeat, repeat, evidence be damned.

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In the forty years since Nixon declared us to be Keynesians the US has run up huge budget deficits made even larger recently by "economic stimulus packages," and has resorted to "quantitative easing" (formerly called "currency debasement") printing money to try to get the economy "moving again," besides raising money by selling bonds (IOUs) to people who are not Keynesians, including you, me, and the Chinese government.
Did you notice how Nixon's "reputed" comment about Keynes now becomes a solid fact just two paragraphs later?

And did you know that King Edward III of England ran up huge budget deficits in the 13th century made even larger by an economic-stimulus policy of castle-building in England and war in France. King Edward managed to bankrupt/crash several of Europes richest bankers in the process (Bardi and Peruzzi). And he did it with a solid specie-backed currency - including England's first gold coinage and over 600 years before Keynes. Amazing isn't it? No derivatives needed.

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Originally Posted by Tom Palven View Post
Mainstream economists in the US blame Bush policies, Obama polices, the voters, Congress, 9/11, Hurrican Katrina, global warming, and other things for US economic stagnation, but Keynesian macroeconommics remains a Sacred Cow, and gets none of the blame. We are told that the problem is that we need more of it. More taxes and more spending. Eventually, we might begin to wonder whether Adam Smith's advice wasn't better than the advice of economic planners plodding toward a central command economy.
Actually, serious economists will point at Carter and Reagan's policies, as well as Alan Greenspan's term at the Federal Reserve. I suppose it is relevant to point out that both Reagan and Greenspan were both very much followers of the Austrian school and allegedly hated Keynesianism as much as the author of the OP.

No, Keynesian economic policy doesn't get the blame because it hasn't been the source of our problems. Heck, we don't even follow Keynesian policy at all (or not since the 1950's). Governments spend money. Capitalism has boom and bust cycles. These are natural events. You don't need a conspiracy theory or a boogie-man named Keynes to account for them.
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Old Dec 19th 2013, 07:42 AM
Tom Palven Tom Palven is offline
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Default Re: Economics: A Very Brief History

Michael, I've been going around and around with people on the subject of macroeconomics, and Keynesianism in particular, both on the web and in person, for a number of years now, and instead of addressing your points individually, allow me to try to break some new ground, if you will.

Call the men in the little white coats because it seems to me that:
1. Keynesian macroeconomcis is not only ineffectual, it is a hoax.
2. Modern macroeconomics, credited largely to the thoughts of Keynes, who "saved capitlaism," "pulled the world from the Great Depression," and so on, is not a science.

When Einstein drew up pages and pages of equations it looked like a possible hoax, but when they were put to the test there was a terrific explosion and a mushroom cloud.

When macroeconomists like Paul Krugman and Ben Bernanke make economic predictions drawn from pages and pages of texts by various macroeconomists like N. Gregory Mankiw, they have been unable to predict anything accurately.

The predictions that the US economy is turning the corner and making a recovery, and the Chinese economy is tanking, have been made by mainstream economists on a monthly basis for years, then on a weekly basis, and now the mainstream media makes these same predictons on an almost daily basis, but the Chinese economy continues to surge ahead while the US economy stagnates. The lastest excuse (ater blaming Bush, Obama, Hurricane Katrina, Congress, the voters, 9/11, etc.) is that the Chinese have a young economy, and that the US has a "mature" economy, which, according to Paul Krugman may be at a "new normal."

The only areas where "macroeconomics" is accurate is where it has usurped the province of classical microeconomics in the areas of supply and demand, actuarial insurance tables, and so on. When macroeconomists make predictions with regard to their specialty, the health of natiion-states, they are no more accurate than the predictions of astrologists, and the literature of macroeconomics has shown itself to be no more a science than all the books written on astrological predicting.

Except, again, where macroeconomics has infringed on the science of classical microeconomics, macro is totally related to the taxing, borrowing, and spending policies of nation-states, despite the arguments of some statist apologists to the contrary. Actual sciences like biology and geology stand alone without the presence of the coercive taxation of nation-states.

A few people have concede that "Okay, Keynesiansim isn't perfect, but then go on to add that unlike Adam Smith, Lord First Baron John Maynard Keynes was an egalitarian out for the interests of the little guy, while Smith as the mentor of capitalist pigs. (to be continued.)

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Old Dec 19th 2013, 07:52 AM
Tom Palven Tom Palven is offline
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Default Re: Economics: A Very Brief History

(cont.)

IMHO, Adam Smith was the egalitarian. It's been almost 50 years now since I read Smith's work, The Theory of Moral Sentiment (1759), which was the ethical basis for his later work The Wealth of Nations, 1776. As I recall, it is a meticulous work of genius, like Darwin's Origin of the Species, but like The Origin of the Species, it is very dry. Smith was for the little guy and not the royal elite and the well-connected capitalists. I ordered a copy from Amazon the other day and I'm going to read it again and will deliver a report on it here with your permission, and if the Good Lord's willin' and the crick don't rise.
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Old Dec 21st 2013, 10:43 AM
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Quote:
Originally Posted by Tom Palven View Post
Michael, I've been going around and around with people on the subject of macroeconomics, and Keynesianism in particular, both on the web and in person, for a number of years now, and instead of addressing your points individually, allow me to try to break some new ground, if you will.
You are not actually breaking any new ground here. You are still just repeating the same old discredited rightwing hack-arguments that have been repeated for decades.

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Originally Posted by Tom Palven View Post
Call the men in the little white coats because it seems to me that:
1. Keynesian macroeconomcis is not only ineffectual, it is a hoax.
2. Modern macroeconomics, credited largely to the thoughts of Keynes, who "saved capitlaism," "pulled the world from the Great Depression," and so on, is not a science.
Your two statements here would give you a standing ovation if you stand in front of a bunch of rightwing hacks and/or teaparty types. It would bring you gales of laughter if you said it in front of actual academic economists.

1. You have never demonstrated any factual understanding of Keynesian economic theory at all - so it begs credibility for you to diagnose any problems with it. You seem to think that any time a government spends more than it receives in revenues that this is "Keynesian". This is absurd and that's why everything you say about Keynesian theory is equally absurd.

I've explained repeatedly how Keynesian theory works and how our western governments do not follow Keynesian theory at all. Indeed, over the last twenty-five years, Austrian theory has been dominant at the US Federal Reserve and across most western countries (US and Britain in particular, but also Germany as well). This makes your attack upon present economic policy equally absurd because you are pretending that Keynesian theory is dominant and you are using the Austrian critique to do it. Bottom line is that we are running Austrian theory these days, not Keynesian.

2. Anyone who claims that economics is a predictive science is an idiot. This is a really, really common strawman argument much favored by rightwing hacks. It isn't even worthy of a refutation or reply because it is just too absurd to even talk about. Economics is not a hard science and never has been. They teach about this difference in high school.

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When Einstein drew up pages and pages of equations it looked like a possible hoax, but when they were put to the test there was a terrific explosion and a mushroom cloud.
Forty years, thousands more pages, literally hundreds of scientists and hundreds more tests stand between the two events you speak of here.

Anyway, this is absurd - since it seems like you are still going on about economics not being a predictive science, which is just plain wingnut land.

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When macroeconomists like Paul Krugman and Ben Bernanke make economic predictions drawn from pages and pages of texts by various macroeconomists like N. Gregory Mankiw, they have been unable to predict anything accurately.
Believe it or not, predicting weather is considered a science.

But economics is not a hard science and therefore cannot produce mechanistic predictions. Economic theory can only make 'best guess predictions' - which is what it does.

Anyone who doesn't understand this has no business critiquing it.

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The predictions that the US economy is turning the corner and making a recovery, and the Chinese economy is tanking, have been made by mainstream economists on a monthly basis for years, then on a weekly basis, and now the mainstream media makes these same predictons on an almost daily basis, but the Chinese economy continues to surge ahead while the US economy stagnates. The lastest excuse (ater blaming Bush, Obama, Hurricane Katrina, Congress, the voters, 9/11, etc.) is that the Chinese have a young economy, and that the US has a "mature" economy, which, according to Paul Krugman may be at a "new normal."
Wow. Where do you dig this crap up?

Yes the Chinese economy is tanking - relatively speaking - its growth rate is only single digits these days and not the double-digits it was in for the last twenty years. At the same time, an 8 or 9% growth rate in China is still solid growth. But a 9% growth rate in China is NOT ENOUGH GROWTH to pull the slow American economy along with it.

When China has really strong growth (like double-digits) it is strong enough to boost the overall world economy with demand.

So, you see, saying that Chinese economy is "tanking" right now and that the Chinese economy is growing fast are not contradictory statements - it just depends upon your perspective and whether you are looking at the US or China. China's growth isn't high enough to boost the US economy so American economists say that China's economy has 'tanked'. But the Chinese economy is growing at 7-9% which is good for China (but not good enough for America).

And yes, Krugman is correct - we've reached a 'new normal' plateau, but I'm not going to explain that because you just mangle up this stuff, get it backwards and apparently willfully misunderstand it (or just ignore what I say).

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Originally Posted by Tom Palven View Post
The only areas where "macroeconomics" is accurate is where it has usurped the province of classical microeconomics in the areas of supply and demand, actuarial insurance tables, and so on. When macroeconomists make predictions with regard to their specialty, the health of natiion-states, they are no more accurate than the predictions of astrologists, and the literature of macroeconomics has shown itself to be no more a science than all the books written on astrological predicting.
Nice rant and more hackery.

General economic predictions about any given nation's future economic growth are remarkably accurate when aggregated (almost always within half a percentage point of GDP).

So saying that these statistical measures don't work is just absurd. The Economist magazine publishes exactly this data every two weeks in the back pages of their magazine. Go ahead, check it out and then come back here and show us how those numbers are wrong.

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Except, again, where macroeconomics has infringed on the science of classical microeconomics, macro is totally related to the taxing, borrowing, and spending policies of nation-states, despite the arguments of some statist apologists to the contrary. Actual sciences like biology and geology stand alone without the presence of the coercive taxation of nation-states.
Are you still trying to argue that economics isn't a 'hard science' like biology and geology? Seriously? The only people interested in this argument are rightwing hacks - they love this argument. To anyone else, especially anyone who has university education, this is just silly.

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Originally Posted by Tom Palven View Post
A few people have concede that "Okay, Keynesiansim isn't perfect, but then go on to add that unlike Adam Smith, Lord First Baron John Maynard Keynes was an egalitarian out for the interests of the little guy, while Smith as the mentor of capitalist pigs. (to be continued.)
This 'canned rightwing hackery' at its best. Totally wrong, totally backwards. That's a classic rightwing spin argument. It starts with bullshit as its premise and then makes ideological conclusions based on that bullshit premise.

In reality, Keynesianism is always the enemy. Adam Smith is always god. Haven't you been paying attention to economics? That's what the Austrian/Chicago school always says, over and over again and that's how our economic and political insititutions actually operate (hint: ignore what they say and pay attention to what they do). Our elite economic institutions (like the US Federal Reserve) are working on Austrian/Chicago theory these days which is why inequality is soaring, billionaires are getting richer and average workers are getting poorer. That's what Austrian/Chicago school is all about. They don't want anyone to apply Keynesian theory in practice because that would upset their applecart. So the hate is on for Keynesian theory. But it is Austrian/Chicago theory that mostly rules the field of managing the US economy.

So we are running Austrian/Chicago theory these days, that means the billionaires are getting richer, the working man is getting screwed, inequality is skyrocketing and they are desparately trying to pin the blame on Keynes. And you are one of their foot-soldiers, working hard to get others to believe that up is down so we can have more Austrian/Chicago austerity bullshit (more tax cuts for billionaires!).
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Old Jan 4th 2014, 08:15 AM
Tom Palven Tom Palven is offline
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Michael, when I speak of macroeconomics as a hoax, you respond with such things as "Anyone who doesn't understand this has no business critiquing it."

These are the kinds of arguments Jesuits and Orthodox Rabbis use in defending their own faiths.

In fact, early indoctrination in one of the Biblical Judeo-Christi-Islamic sects is probably perfect training for the acceptance of macroeconomics.

If one can believe that Jesus is the Son of God from a virgin mother, as more than 70% of Americans do, and that over 10,000 Saints performed at least one miracle; or that Jews are God's Chosen People; then it should be easy to also accept the validity of macroeconomics, which also has myriads of books and scholarly testimony supporting it, without a shred of reliable evidence.

Paul Krugman and Ben Bernanke might do as well by just praying that the average US standard of living will improve.

If there is evidence, tell me about it.
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Old Jan 4th 2014, 09:42 AM
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Michael, when I speak of macroeconomics as a hoax, you respond with such things as "Anyone who doesn't understand this has no business critiquing it."
I'm wide open to discussing macroeconomics. But when you just describe all deficit spending as "Keynesian", that's nonsense (bullshit rightwing attack meme), and therefore all that follows is equally so.

I might also add that all of my critiques have been laid out and examples given. You are misrepresenting my arguments in this thread if you are characterizing them as baseless 'ad hominens'.

If you stop using these rightwing-partisan memes, then maybe one can discuss the issue meaningfully. Likewise just saying that Bernacke or Krugman are idiots, doesn't add up to anything.

I fundamentally believe that we have some major macroeconomic problems in our present society. Zero percent interest rates don't seem to have any stimulus effect at all. That's bizarre, unprecedented and contradicts all known economic theories. That's indicative of a much deeper problem being present (which is defined by an overall reduction or lack of aggregate demand).
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Old Jan 6th 2014, 10:52 AM
Tom Palven Tom Palven is offline
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I'm wide open to discussing macroeconomics. But when you just describe all deficit spending as "Keynesian", that's nonsense (bullshit rightwing attack meme), and therefore all that follows is equally so.
I agree with you. I know for a fact that one of my brothers-in-law who has done extensive deficit spending in Las Vegas is not a Keynesian.

However, for your amusement, you might check out the article below that makes the same misuse of the term "Keynesian."

http://takimag.com/article/the_stree...#axzz2pXOkIXHf
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Old Jan 6th 2014, 07:24 PM
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I agree with you. I know for a fact that one of my brothers-in-law who has done extensive deficit spending in Las Vegas is not a Keynesian.
Vegas is rather famous for that. I don't believe Maynard Keynes ever went to Vegas.

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However, for your amusement, you might check out the article below that makes the same misuse of the term "Keynesian."
I could post a 1000 posts in this thread showing examples of people misusing or abusing the term of Keynesian economic theory. Nothing unusual about that. The rightwing attack machine (and the Austrians and the Chicago School and the Randians) have been pushing this deficits=Keynes bullshit for over half a century now. They are deeply invested in that attack meme.

Btw, Theodore Dalrymple has some issues (and not just a lack of understanding of Keynesian theory). It appears this is where he's shown up after being run out of town last year. Apparently Mr Dalrymple used to consider himself a lefty, but apparently switched sides last year and has been posting rightwing memes ever since. My guess is that he's trying to get in on a rightwing welfare gig from Heritage Thinktank or something like that. Though, dabbling with Nietzsche isn't good for anyone's career.
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Old Oct 10th 2016, 02:48 AM
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Macroeconomists "are totally off base."
http://www.marketplace.org/2016/10/0...e-totally-base
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