Friday, October 22, 2010

Keynesian Economics is on Life Support and I wish it would die

In less than two weeks on November 3rd, the Federal Reserve next policy committee will end. It is suspected, if Chairman Ben Bernanke is true to his word, the central bank will attempt to drive down interest rates even lower. This if true, since traditionally the Federal Reserve bank usually cuts short term interest rates to spur economic activity, will show their traditional advocacy of Keynesian approach to economic growth. Unfortunately this is also problematic if trying to avoid inflation is of any importance.

John Maynard Keynes is the father if what many refer to as Keynesian Economic Theory. Keynesian economics is a theory that promotes the view that total spending or aggregate demand is essential to dealing with improving economic outputs and inflation. Its premise is based on the assumption that economic activity is influenced mainly by public sector decisions – mainly monetary and tax policy. The main output from this perspective is employment and not prices. This since monetary and tax policy cannot impact employment if prices or cost are not rigid entities. One reason why KET is obsolete, for if wages, if measured in terms of dollars, will not be able to define real or actual purchasing power at the individual consumer level.

Another unfortunate aspect of KET is that all economic solutions are designed and targeted directly to deal with the business cycle versus the individual worker or wage owner. Mostly due to the observation that there will always be a delay between when economic policy takes effect and when the individuals in charge, like the government actually recognize that an economic problem exists and the time it will really takes to impact the economy.

These methods are opposite to the prior approaches to economics that pushed for more of a Laissez-fair capitalism, which in its simple nature excludes the public sector in the market unlike Keynes. In fact, Keynes advocated for a central bank to be used to expand money supply, which assumes that putting more loot in folks hands would result in an increase of consumer confidence, which would result in people spending more since Keynes believed that putting money into the hands of the people would eventually go to the wage earnings of another.
But history has proven this wrong, although Bernanke, Obama and all the presidents and Fed Chairmen before both of the aforementioned act otherwise. First history is not equal to theory, which it is obvious Keynes could not comprehend. Second, the belief that massive deficit spending will flood the economy with money is equal to accepting that the Easter Bunny is a real creature that lays colored chicken eggs. The truth is that the economy is not starved for money. Thanks to the bailout, Tarp and prior bank rescues, their reserves have actually increased via the structurally built-in deficit spending under the guise of Keynes. Subsequently, allowing the Federal Reserve to release as much loot as they want for them to use to buy up unlimited amounts of bonds, commodities and securities unlike we the common person. That is now since the government can’t print money but rather have to borrow it from the Central bank.

This all with the applause of the Rothschild’s, Rockefellers and Warburg’s and the forced yet illegal Federal Reserve Act of 1913 – but that’s another story.

I mean tell me if I am wrong, but all the US Central bank does is lend loot interest free to banks that gamble, I mean invest it on Wall Street without any risk – cab you say savings and loan? Because all the banks they lend to is not for them to lend to others or extend and free up the flow of credit, but used to buy up all the assets and infrastructure in America. They got money they just don’t lend it or provide credit – they instead use it to make themselves rich – an assumption that Keynes never considered in his public sector government central bank spending to help the economy models. After all TARP, with the approval of congress gave banks the unfettered authority to seize all the property they desire, while at the same time decreasing the value of the dollar, making all that us regular folk buy more expensive.

All I am saying is that KET as has been practiced historically and currently promulgated by Obama and Bernanke has a troubling impact on mostly us main street folk who lived on fixed incomes. The stimulus to be honest about it was too little too late, not to mention the folks it was designed to help were the banks that CAUSED this recession. The fact still remains that the Federal Reserve Bank is a private corporation and no more apart of the US Government than Waffle House.

Thomas Jefferson spoke of such and said it best when he wrote: "If the America people ever allow private banks to control the issuance of their currencies, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their prosperity until their children will wake up homeless on the continent their fathers conquered."

Mr. President, Keynesian economics doesn’t work and is on life support due the idiot Wall Street bankers you take economic advice from. Please do not necessitate it.

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