Keynesian Results - Explained

[imoldernu]

https://www.peakprosperity.com/blog/108919/how-long-can-great-global-reflation-continue?utm_campaign=weekly_newsletter_285&utm_source=newsletter_2017-05-20&utm_medium=email_newsletter&utm_content=node_link_108919

How Long Can The Great Global Reflation Continue?
And what will happen when it ends?
by Charles Hugh Smith

Right or wrong, an explanation that I can understand, with some numbers that make sense to me. Nothing to be done or to be gained from reading the blog, but it helped me understand some of the why's of soaring debt, as well as the government actions that are taken to control the economy.

Your take on the conclusion may be different than mine, but at the very least, the actual numbers offer a look into the global economy as it exists today.

 

[Independent]

I'm not sure what explanation you see here.

There are some facts that I think we all knew.
- US Federal debt went up a lot following the collapse of house prices.
- Congress is planning to continue deficit spending even though we're at 4.4% unemployment.
- In the US, the rich are getting increasing shares of total income while real incomes in the middle are about flat.

I don't think he explains why middle incomes are flat while the rich get richer. Maybe you saw an explanation that I missed.

(AFAIK, Keynes did not recommend continuous deficit spending. That was a prescription limited to the topsy turvy world of depressions.)

 

[samclem]

Your take on the conclusion may be different than mine, but at the very least, the actual numbers offer a look into the global economy as it exists today.

Thanks. The blog is (obviously) a bit polemic, but there's useful information there.

One thing overlooked is that Keynes argued for a recouping of stimulus funds once the economy had been "fixed" (i.e. no indefinite deficit spending). In the real world, that doesn't seem to happen--everyone enjoys the new, seemingly never-to-end party and nobody wants to pay the money that we owe for the liquor.

 

[Totoro]

Isn't Keynes in essence: force people to spend (via government) when demand is irrationally down, and force them to save when it is irrationally up?

Basically to break and dampen self-reinforcing cycles.

That general idea to me makes sense on the surface, in practice and detail it ain't that simple though. As a simple thought: assuming 'all the people' (government) can behave more rational than individuals is a bit naive.

 

[razztazz]

Isn't Keynes in essence: force people to spend (via government) when demand is irrationally down, and force them to save when it is irrationally up?

Basically to break and dampen self-reinforcing cycles.

That general idea to me makes sense on the surface, in practice and detail it ain't that simple though. As a simple thought: assuming 'all the people' (government) can behave more rational than individuals is a bit naive.

NOt doing it A) was not any better and B) much worse due to it's own inherent characteristics of non-workability No thought experiments needed . Just recognizing the bloomin' obvious

The real answer is no system is perfect. The only question is: So just exactly how do you want the system to work? and get as close as feasible

 

[Koolau]

I'm no economist and I don't claim any special insight. With that in mind, my thoughts on:

Flat middle class: In all the travail of various markets (housing, bonds, stock market, etc.) we may lose sight of the fact that there is simply less need for the kinds of tasks that the middle class historically perform. Materials handling -everything is containerized and machines do all the heavy lifting at j*b sites. Manufacturing - Many of those j*bs have gone to places where folks will gladly w*rk for a tenth of what w*rkers in the US demand. Service industry - immigrants have taken a number of j*bs which traditionally were filled by the middle class - Son used to be reasonably well paid as a cook in an upscale "chain" restaurant. He wanted to move into wait staff as it paid even better, based on tips. Recent trip to "his" restaurant indicated that virtually all kitchen staff was filled with immigrants and significant portion of wait staff is now immigrant.

I imply no "good or bad" but just what I have seen. If what I have seen and observed in the news, etc. is correct, supply and demand would dictate that the middle class must, of necessity shrink. A "world" economy begins to share the j*bs once "guaranteed" to our middle class among a world where labor is much less expensive.

If any of this sounds "political", it is not intended as such. My point is that with all of our ability to manipulate markets, currency, deficits, inflation, interest rates, etc. etc., NO government can cancel the law of supply and demand. On the margins, governments can fiddle with stuff, but human's always find ways around every policy eventually and default to self interest. Whether that leads to gray markets, black markets, off-the-books, etc., people always find their way back to a "free market" of labor and products. Right now, that's not good news for the middle class IMO.

I'm sure there are plenty of folks who disagree with my treatise but I believe "you can't fool mother nature." Naturally, YMMV.

 

[Which Roger]

The middle class is indeed shrinking. However the data I've seen show that more people are moving upward (from middle class to upper middle class) than are moving downward (from middle class to lower middle class).

 

[Koolau]

The middle class is indeed shrinking. However the data I've seen show that more people are moving upward (from middle class to upper middle class) than are moving downward (from middle class to lower middle class).

I would be very interested in seeing such data. From my experience (strictly anecdotal, therefore) I would have said that the opposite is true, but I have no data. Please share your findings. I very much hope you are correct.

 

[jimbee]

I would be very interested in seeing such data. From my experience (strictly anecdotal, therefore) I would have said that the opposite is true, but I have no data. Please share your findings. I very much hope you are correct.

The data on Hans Rosling's site may be interesting to you.
Gapminder: Unveiling the beauty of statistics for a fact based world view.

There is a lot if information, and it's fun to explore the charts. You might want to try the "Wealth and Health of Nations" section.

Many of Dr. Rosling's talks are also available on YouTube.