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Thread: Why Keynesian Stimulus Fails

  1. #21
    Junior Member Claudius the God's Avatar
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    Economists were really operating in the dark prior to the 1930s. Even today, there is much to learn.

  2. #22
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    Quote Originally Posted by Claudius the God View Post
    Economists were really operating in the dark prior to the 1930s. Even today, there is much to learn.
    In the 1930s, I'd agree. But today the economics is out there that has withstood the test of time and generally made the right predictions. The IS/LM and DSGE models have been outstanding in telling us how the economy would react to policies like stimulus, austerity, tax and budgets.There's 80 years of research supporting Keynes', Hicks', Samuelson and others' work. Theres 80 years of proven success in both predictive modeling and solutions to recessions, high inflation, deflation, etc.
    Last edited by Shanty; 30th October 2012 at 09:33 PM.

  3. #23
    Join, or Die nonsqtr's Avatar
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    Quote Originally Posted by Shanty View Post
    In the 1930s, I'd agree. But today the economics is out there that has withstood the test of time and generally made the right predictions.
    That's an incredibly foolish thing to say, considering we just had a total meltdown four years ago.

    The IS/LM and DSGE models have been outstanding in telling us how the economy would react to policies like stimulus, austerity, tax and budgets.
    Oh, so suddenly you like DGSE? Three months ago you didn't know what it was. Well, so good, you've been doing your homework. Maybe there's hope for you.

    There's 80 years of research supporting Keynes', Hicks', Samuelson and others' work.
    Mental masturbation is not research.

    Research means, you collect empirical data, and you have an isolated system to work with.

    Theres 80 years of proven success in both predictive modeling and solutions to recessions, high inflation, deflation, etc.
    Horseshit, cowshit, pigshit, and bullshit. "Proven success" my rosy ass. We just had a total meltdown barely four years ago. Some success, eh?

    Amazing how all these butt-nekkid emperors still claim to be wearing clothes, ain't it?

  4. #24
    Junior Member Claudius the God's Avatar
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    If you listen to Keen and the MMT proponents, the problems with these models is their refusal to include personal debt in the models. But despite this very controversial position, what Shanty says is true over the long run. The Keynesian models and forecasts have been pretty accurate. Can they predict the future? No. If they were that accurate, they would affect the future by giving the modelers a means of betting into or against the future which would then affect it. Econ will always be a psuedo-science....

  5. #25
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    Quote Originally Posted by nonsqtr View Post
    That's an incredibly foolish thing to say, considering we just had a total meltdown four years ago.
    I'll clue you in, like I try to do all the time for you. Policy makers enact legislation. we call them congressmen and Senators and Presidents. Economists do not enact policy.

    You should try to learn some logic. And learn your subject before you speak and prove you're wholly ignorant. It was a Keynesian using New Keynesian models who first identified the housing bubble.



    Quote Originally Posted by nonsqtr View Post
    Oh, so suddenly you like DGSE? Three months ago you didn't know what it was. Well, so good, you've been doing your homework. Maybe there's hope for you.
    nonsqtr. You're making shit up. This is why you're not believable. I never said anything against it. I merely said it was a tool. just like IS/LM is a tool. They can be used to check the other.


    Quote Originally Posted by nonsqtr View Post
    Mental masturbation is not research.
    PPlease don't tell us what you do in your spare time.

    Quote Originally Posted by nonsqtr View Post
    Research means, you collect empirical data, and you have an isolated system to work with.
    You're learning!



    Quote Originally Posted by nonsqtr View Post
    Horseshit, cowshit, pigshit, and bullshit. "Proven success" my rosy ass. We just had a total meltdown barely four years ago. Some success, eh?
    Policy makers that did not heed the warnings. Again, you're ignorance of what happened, and who made it hapopen makes you look silly blaming economists when it was policy makers who crapped the economy up.

    You're seriously dense and have some issues with dishonesty coming out to the forefront when you've been proven wrong. You need to learn the subject before you open the yap and get caught like a flopping tuna.

    Quote Originally Posted by nonsqtr View Post
    Amazing how all these butt-nekkid emperors still claim to be wearing clothes, ain't it?
    Now we know what nonsqtr is mentally masturbating over. Ew.

  6. #26
    Senior Member septimine's Avatar
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    Quote Originally Posted by Shanty View Post
    It looks like you have a lot of misinformatio n to unlearn. The basic premise of Keynesian stimulus is that it's a) temporary and b) sees the money from government deficit spending go into the markets freely by those who have jobs to build demand.
    they
    How many YEARS is temporary? We still are helping out GM, and not only is there no cut-off date on bad banks, but our "temporary help" is permanent, essentially, because we intend to pump money into a system that isn't using the money to create jobs ... until they create jobs. In other words permanent QE that's being called temporary because we don't want it to be permanent. Which is also what happened with the temporary help in the 1930's -- it doesn't work because withdrawing the funds means a crash when the propped up industries that haven't restructured or folded do exactly that when the funds go away. That's why so many of the Great Society and New Deal programs aren't ending or even keeping up with the times -- the industries involved would not survive as they've essentially learned to do what the government wants them to do, rather than what the market wants them to do. People do this too, there are entire industries that exist (for example the long term care planning industry that tells people how to "go broke" so as to live on Medicare (AKA welfare) rather than spend their own money on a nursing home). That's what actually happens. Temporary is only temporary until people realize that the system has grown dependent on the temporary help, and thus it becomes permanent and people plan to take advantage of the system. Then it's permanent, and whole segments of the economy evolve to help the dependent get the money that is "due to them".

    If you can show me a "stimulous" that was actually temporary, actually ended and no longer exists, I'll buy the temporary arguement. It doesn't happen.

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    Quote Originally Posted by septimine View Post
    they
    How many YEARS is temporary?
    Frankly, had the stimulus been larger, the temporary part would have been sooner. But, different scenarios need different policies. Whatever it takes, to meet the circumstances.

    Quote Originally Posted by septimine View Post
    We still are helping out GM,
    Untrue. No more bailout funds have gone to GM.

    Quote Originally Posted by septimine View Post
    and not only is there no cut-off date on bad banks, but our "temporary help" is permanent,
    Untrue. I disagree severely with how the bailouts were done, and even that we bailed out the banks. But it's done, and other than liquidating banks unable to meet their minimu standards for operations, in an era that has a lack of firewall between commercial banks and finance banks, we're generally not bailing them out like we were in the free fall that Bush and the GOP left behind.

    Quote Originally Posted by septimine View Post
    essentially, because we intend to pump money into a system that isn't using the money to create jobs ... until they create jobs.
    Hence my preference for fiscal policy over monetary policy. But fiscal policy need a political solution, and the GOP are doing all they can to institute their failed ideology into a situation that needs a dose of reality from them.

    Quote Originally Posted by septimine View Post
    In other words permanent QE that's being called temporary because we don't want it to be permanent.
    It's not permanent, particularly if the GOP work towards passing bills like the American Jobs act and similar legislation.

    Quote Originally Posted by septimine View Post
    Which is also what happened with the temporary help in the 1930's -- it doesn't work because withdrawing the funds means a crash when the propped up industries that haven't restructured or folded do exactly that when the funds go away.
    You'll have to be more specific, because largely, after Hoover's neglect of the economy crash from Coolidge's incompetence (a Laissez Faire approach), FDR reorganized regulatory laws and tried putting people to work. Like Obama, he and Democrats did not put as much money into the economy to break the high unemployment until the late 1930s. But as noted on this thread, there wasn't really a policy prescription until Keynes came up with one. And then, no one was sure it would work until WWII broke out and proved deficit spending to end a recession to work. Granted, FDR saw it when he had his double dip because he tried to bring deficits under control before the economy was able to withstand austerity measures.

    Quote Originally Posted by septimine View Post
    That's why so many of the Great Society and New Deal programs aren't ending or even keeping up with the times
    The ones that haven't ended were intended to be more than temporary. The temporary ones, like the WPA and such, are, and have been done for many decades.

    Quote Originally Posted by septimine View Post
    the industries involved would not survive as they've essentially learned to do what the government wants them to do, rather than what the market wants them to do.
    Specifics?

    Quote Originally Posted by septimine View Post
    People do this too, there are entire industries that exist (for example the long term care planning industry that tells people how to "go broke" so as to live on Medicare (AKA welfare) rather than spend their own money on a nursing home).
    The corporate backing of the breaking of unions and pensions has done more for causing that than anything.

    Quote Originally Posted by septimine View Post
    That's what actually happens. Temporary is only temporary until people realize that the system has grown dependent on the temporary help, and thus it becomes permanent and people plan to take advantage of the system. Then it's permanent, and whole segments of the economy evolve to help the dependent get the money that is "due to them".
    You haven't pointed to anything temporary becoming permanent yet.

    Quote Originally Posted by septimine View Post
    If you can show me a "stimulous" that was actually temporary, actually ended and no longer exists, I'll buy the temporary arguement. It doesn't happen.
    WPA, WWII government expenditure, the ARRA, the initial investments into the Interstate Highway systems, etc.

  8. #28
    Veteran Member BombJack Arcade Champion, Bubbels Champion Daktoria's Avatar
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    Quote Originally Posted by Koios View Post
    Every time. You simply cannot spend money into the economy without it having an effect on the demand that drives hiring and investment.

    Where it's questionable is in its durability. When the spending stops, so too does its benefit.
    You're assuming that effect is real, not nominal. Expanding the money supply can also lead to inflation by definition of MV=PT.

    However, during the time the economy is being stimulated, momentum shifts upwardly, always correcting momentum that was going downwardly. In short, business and consumers cut back when they think things are getting worse. Then they loosen up when they believe good times are ahead, since economic mood is a self-fulfilling prophecy.
    If economic mood was a self-fulfilling prophecy, then people could wish money to grow on trees.

    The only self-fulfilling prophecy going on is social rejection where those who don't believe in national myths are rejected so liars can exercise authority.

  9. #29
    Veteran Member BombJack Arcade Champion, Bubbels Champion Daktoria's Avatar
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    Quote Originally Posted by Shanty View Post
    No. The panic led to reforming of the banking/financial sector. It may have also helped to get Keynes to see the results of the panic and offer up a way to allow the markets to correct themselves with a little help from governments.
    ...so reforms followed the panic, they didn't solve the panic.

    After WWII, it didn't have anyone flinging bullets at each other. The success was in ending the Great Depression. The government spending ended the high unemployment and allowed firms to ramp up production to meet demand. Buit Keynesian policy did not start a war, ever.
    That's nonsense. Demand was satisfied from the war's necessity.

    As for not starting the war, that's nonsense as well. When people don't think in themselves because the government's thinking for them, it means they're going to have "abuse of process" become a regular part of life.

    The longer this lasts, the longer it builds up. People either have internal breakdowns of social fabric, or international conflicts of release.

  10. #30
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    Quote Originally Posted by Daktoria View Post
    You're assuming that effect is real, not nominal. Expanding the money supply can also lead to inflation by definition of MV=PT.
    it can during "normal times". In the liquidity trap we're in now, it largely hasn't.
    http://www.newyorkfed.org/research/e...n/palgrave.pdf



    Quote Originally Posted by Daktoria View Post
    If economic mood was a self-fulfilling prophecy, then people could wish money to grow on trees.

    The only self-fulfilling prophecy going on is social rejection where those who don't believe in national myths are rejected so liars can exercise authority.
    not if Mittens and the TeaBaggeds and their mythology are rejected in the elections.
    Last edited by Shanty; 4th November 2012 at 09:27 PM.

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