The View From 1776

Deadly Fruit of Keynesian Economics

John Maynard Keynes, the expositor of his eponymous school of economic theory, believed that inflation was a good thing.  The fundamental thrust of Keynesian economics is justifying the socialist contention that government control of the economy is necessary to attain social justice, i.e., equal incomes, equal property, and equal poverty.  Keynesian style gradual inflation, unlike a bloody Marxian revolution, can destroy upper echelon wealth bloodlessly and gradually.

Presumably those of us not among the liberal-progressive-socialist elite would look only at the fact that salary and wage increases stemming from government deficit spending and Federal Reserve loose-money polices were temporarily making us better off.  Keynes expected that workers would not understand the connection between government’s economic polices and subsequent inflation that diminished in the long run the buying power of the dollars they were being paid in the short term.

The Federal Reserve’s official policy target today is creating enough phony money to hit an annual inflation rate of 2%, a rate that will steal about half the value of a normal working life’s income and savings.

Measured In Gold, The Story Of American Wages Is An Ugly One

Posted by .(JavaScript must be enabled to view this email address) on 10/09 at 10:22 PM
  1. Thomas,

    The problems with attaining a zero inflation rate are several. Measuring inflation is imprecise. If you try to get too close to a zero rate, you risk going into the deadly spiral of deflation and an economic catastrophe.

    The other aspect (one which you would cheer) is that when inflation declines to zero, interest rates also decline to zero, and the FED then ceases to have any ability to influence the economy. While you might think this would be a wonderful thing, most economists would see this as a recipe for disaster.
    Posted by .(JavaScript must be enabled to view this email address)  on  10/10  at  09:49 AM
  2. J. Jay,

    Please cite a single case of your 'deadly spiral of deflation'. We have seen deflation many times in our nation's history, most of which were as beneficial to consumers as they were mildly 'harmful' to speculators (aka, investors, gamblers). I can only think of one case in which deflation caused a major uproar, and that came from Wallstreet only. It's effect was profound not because it profoundly affected consumers or consumption (to the contrary, deflation generally spurs household consumption) but because it held down profits. Their complaint (resulting in a lobbying effort to curtail deflation ever after) has had as one result greater a 'wealth disparity' as between poor and rich. As a long complaining socialist, I would think you'd disavow such a result. Yet, here you are defending a long established, Wallstreet-favoring manipulation! I am shocked, shocked I say!!

    Not really, but this shows just how mal-informed you are both as to history and the stock propaganda. You've been had son, and by your own Party.
    Posted by .(JavaScript must be enabled to view this email address)  on  10/12  at  07:48 AM
  3. Bob,

    A deflationary spiral occurs where decreases in price lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in price, etc. A deflationary spiral is present when reductions in price lead to a vicious circle, where a problem exacerbates its own cause. The Great Depression is a fine example of a deflationary spiral. Japan in the 90's experience a less drastic version.
    Posted by .(JavaScript must be enabled to view this email address)  on  10/24  at  10:08 PM
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