I've Come To Bury Keynes

Is Keynesianism dying? Is it already dead? Conversely, maybe it's not even sick? Maybe it's actually the cure? 

Look, I think you already know how I feel. The theories of Keynes have been utilized as a cover story for quasi-socialists and progressives for nearly 80 years. Do you want social welfare (Johnson, Obama)? More government spending! Do you want an expanding military/empire (both Roosevelts, Eisenhower, Reagan)? More government spending! Do you want corporatism and crony capitalism (Nixon, Clinton, Bushes)? More government spending! Do you want more power in the hands of the elites and less in the hands of the individual (the Fed)? More government spending! All in the name of the great John Maynard Keynes.

That this failed experiment is rapidly crashing should come as a surprise to no one. All we can do here is plan accordingly. For fun, however, here is a thought experiment. First, watch this brief video. It's about 10 minutes and the best parts are in the middle. Pay particular attention to the scrolling commodity prices at the bottom of the screen around the 4:30 mark and be sure to watch the FBN segment at around the 5:30 mark.

Now, follow that up with these two pieces. First, this article from Stephen Moore. I'm not a big fan of Mr. Moore as I think he's a political hack who only sees things through a prism of left vs right. However, outside of a few Reagan-apologist paragraphs, this is a well-written piece:

http://spectator.org/archives/2011/10/06/is-keynes-finally-dead

Having read that, you're ready for this final part of the experiment. Below is a video from last week of Stephen Moore "debating" some dude named Thom (clearly he's too smart to simply go by "Tom" like everyone else named "Thomas") Hartmann. 

Again, please spend some time considering both sides of the Keynesian "argument". Just because I say that "the end is upon us" doesn't make it so. I could (gasp!) be wrong. You must research and consider the facts yourself. Come to your own conclusions. Act and prepare accordingly.  TF

p.s. If there really is going to be a CFTC meeting tomorrow to discuss position limits, do not be surprised to see some EE shenanigans overnight. The Forces of Darkness may want to "remind" the commission just who really is in charge...

196 Comments

FriedEggs's picture

baked?

baked?

.

Fried(e)

tmosley's picture

Before you bury him, I'm

Before you bury him, I'm going to desecrate the corpse.

exiledbear's picture

I'm a Cynican

That's neither Keynesian nor Austrian. Actually, I think all economic thought at the bottom of all of this, you know post-collapse and all - will be equated to things like drug dealing and prostitution. To discuss economics, will be tantamount to discussing whether bordellos or streetwalkers are better. Or the merits of crystal vs. powdered coke.

I think the politicians have taken what they wanted to hear from Keynes and left the rest with the academic institutions.

I think those same politicians (and their corporate buddies) take what they want to hear from the austrians and libertarians and leave the rest with the policy wonks and the think tanks.

Here's my opinion. I think for some things (a narrow and well defined class of activities) removing the profit motive actually makes them run BETTER. Get the ideology and religion out of your skull and just look at the world around you.

For other things a profit motive seems to work out pretty well. And you always have to ask better for who? Better for you? Better for everyone? Better for the needy? Behind each answer lies an open can of worms, worms that need to be gently sauteed over low heat with a touch of garlic and butter.

And then there seems to be where we are today - where BOTH private industry and the government spectacularly FAIL, and the stupidity and incompetence just boggles the mind.

All I know is, at some point the public (at least the public with wealth to protect) will figure out that it's all coming apart and since the Swiss decided to join the debasement game, there's nowhere else to go except the PMs.

Be Prepared's picture

Keynes - A Liar's Path

A good potential for a refresher of the discussion we've had a few times on this board.  For me, its simple.....Keynes path is a fool's errand that all the nations of the world have willing followed and, with the printing of gobs of fiat, will follow to its dying gasps.  Each day, I try to find a way to look for the positives, but it's a struggle I don't often win.

Stoxxman's picture

Economists have at very least 3 hands ...

My background is Economics and the most heavily used saying is "on the other hand" ...

Everybody should remember to click the "adsense" ads to support this space ... every visit.

Shill's picture

Citigroup 3rd Quarter Results

Citigroup 3rd Quarter Results Do Not Disappoint

Or do they? More obvious fraud with the Banking community. Again Dave hit a homerun.

FriedEggs's picture

I bet only 1% of the 99%

even knows what Keynesian means.

.

Fried(e)

Alex Costa's picture

Austrian Just Makes Sense

If anyone who studies economics could get the slates wiped clean, and then study Austrian economics before Keynes it would make perfect sense.

Then JMKeynes comes in and messes everything up. What a waste.

Shill's picture

Update: Lowes Home

Update: Lowes Home Improvement Store Closing List / Location

The stores affected by today’s announcement are located in:

Los Banos, CA     Biddeford, ME     Old Bridge, NJ
Westminster, CA     Ellsworth, ME     Batavia, NY
Denver, CO     Ionia, MI     N. Kingstown, RI
Aurora, IL     Rogers, MN     Emporia, VA
Oswego, IL     Claremont, NH     S. Tacoma, WA
Chalmette, LA     Hooksett, NH     Brown Deer, WI
Haverhill, MA     Manchester, NH      

http://www.dailyjobcuts.com/

Tesla's picture

Thanks Turd - Was Hoping You Would Comment

On...

Chinese gram denominated gold contracts traded in Remimbi that started on Friday... Could this have anything to do with a beat down prior to a surge in physical demand??

Jdawg's picture

E Mail form Bart Chilton

I support strong limits. Here are two news articles that relate to things I think can impact markets, and therefore, prices (and not just on ag and food, but on metals and energy).
B

Economists Call for Crop-Trading Limits to Curb Volatility

By Alan Bjerga - Oct 10, 2011 6:15 PM ET

Hundreds of economists including scholars from Oxford University and the University of California, Berkeley, are asking the Group of 20 nations to impose limits on speculative positions in food commodities to curb volatility in crop prices.

“With around 1 billion people enduring chronic hunger worldwide, action is urgently needed to curb excessive speculation and its effects on global food prices,” according to a letter signed by 461 economists and sent to finance ministers from the G-20, which includes the world’s richest nations. The letter, dated today, was posted on Oxfam America’s website.

Research sponsored by the United Nations, International Monetary Fund and other global organizations suggest speculation in crop futures by index funds and large banks may cause price spikes that can put grocery costs out of reach for poorer people. Global regulation of speculators has been a goal of French President Nicolas Sarkozy during his term as leader of the G-20 this year.

EU finance ministers last week agreed to a derivatives- regulation plan that may require exchanges and other venues to share trading data with rival clearinghouses to make futures speculation more transparent. In the U.S., some rules on commodities trades under a financial-reform law passed in 2010 won’t be completed until at least the first quarter of 2012, Commodity Futures Trading Commission Chairman Gary Gensler said last week. A CFTC vote on position limits, one of the bill’s most contentious components, could happen as soon as Oct. 18.

Facing Choices

“There is a choice that the CFTC and the EU have to make,” Rohit Malpani, an adviser to Oxfam America, the U.S. arm of Oxford, U.K.-based Oxfam International, one of several groups that helped organize the letter, said last week in a telephone interview. “Listen to experts or those impacted by high food prices, or listen to those who are benefiting from volatility, largely the banks and funds that have increasingly moved to these markets.”

The CFTC’s proposals on position limits and derivative exchanges “often represent an overstepping of the commission’s authority” under financial regulations set by the 2010 Dodd- Frank Act, Terrence Duffy, the executive chairman of CME, the world’s largest futures trader, said in testimony submitted to the Senate Banking Committee in April. Numerous published studies question any connection between speculation and price volatility.

CFTC Member Response

The economists’ letter was also sent to CFTC members and to Michel Barnier, the European Union’s financial-services commissioner.

“For those who say no evidence exists linking excessive speculation and prices, they just aren’t looking,” CFTC Commissioner Bart Chilton said today in a statement. “Scores of studies and papers exist which document the linkage.”

Cheetah" Traders Are Dangerously Controlling Our Markets

Robert Lenzner, Forbes Staff

10/08/2011 @ 6:15PM  

The newest breed of traders–the fastest high speed market operators in the world are called “cheetahs” after the fastest  land  animal in the world, who have been known to go from zero to 60 miles an hour in a few seconds.

The market “cheetahs” use high-speed computing technologies  to trade in and out of the markets “trying to score micro-dollars in milliseconds,” according to  Bart Chilton, a member of the U.S. Commodity Futures Trading Commission.

It is a scandal that we know little or nothing about the “cheetahs” who control 50% all trading in Europe and 30% in the US.   “People don’t know what they do or the value they bring to markets… Some of these folk haven’t historically been the most forthcoming about what do, ” Chilton said in a speech last week. In other words, we know more about hedge funds than we do about “ cheetahs.”  This is totally unacceptable.

“Cheetahs” are doing roughly half all trades in Europe and roughly a third in the U.S. But, we don’t know who they are; we don’t know what they are doing, and we don’t know what devastation trading at warp speed might do to markets. I fear “a slaughterhouse” in the derivatives markets some day, caused by “cheetahs”, including some fellow in Prague, Czechoslovakia– who ranks 3rd in the “cheetah” biggies list. “Cheetahs”  are very primitive 19th century robber barons, who are almost unknown to the investing public, the media, and  the regulators. Make them come clean, I say.

I call this the slaughterhouse mentality of markets, which so far seems to be the cause of exceptional volatility– unusually sharp movements that are otherwise inexplicable. “”Cheetahs” or rather “purebred cheetahs” who dart in and out of the market every few seconds.

“Purebred cheetahs” may have been the cause of many volatile mini-crashes in the markets; when silver plunged 13% in 12 minutes on May 1st, when in just 12 minutes the price of silver  plunged 13%– or  two weeks ago when silver plummeted 27% in 2 trading sessions. How was it on June 9 that the market in natural gas futures fell 8% in just 14 seconds– that’s right, 14 seconds. These mini-flash crashes s take place regularly in derivatives and securities markets, which can have a “slaughterhouse” impact on ordinary investors.

The whole purpose of our markets were to have them open, transparent and fair. But today with 80% of every single transaction being done by computer, we have handed over our free markets to a new species that hardly anybody understands– the high frequency trader. There are even huge hedge funds that are not  part of any formal exchange that have this market to themselves.

“The bad news is that with trading at such warp speeds, we still can’t rule out another major Flash Crash,” Chilton said On October 4th in Chicago.

NOTE: To get more information or to order Ponzimonium--How Scam Artists Are Ripping Off America, go to this link:

http://bookstore.gpo.gov/actions/GetPublication.do?stocknumber=052-080-00001-1

Neither the CFTC nor Commissioner Chilton receive any money from the sale of Ponzimonium.

daveyboy's picture

Surely this is absolutely

Surely this is absolutely ZERO to do with Keynes, that this in itself is just a distraction. Whether you are for, or against government spending what brought us into this situation was the debt based money system and then by mass extension the derivatives con.

RedRover's picture

Define Success

I think it's successful for TPTB, in diluting the fiat. 
 

RedRover's picture

Schiff is Strong Willed

He was right & he was getting laughed at by others; admire his fortitude.

Tringo's picture

Question on Moore's Article

Moore referred to W's tax rebate and O's payroll tax reduction as examples of Keynesian interjections. I wouldn't think that the gvt giving money back to the private sector/individuals would fall into that category. Allowing people to spend their money (or not) how they see fit is the anti-Keynes, and I'd think that is just the kind of thing the doctor ordered.

Nick Elway's picture

I never completely dismiss Alex Jones.

I never completely dismiss Alex Jones.  He has a video from JULY 2001 BEGGING his listeners to call the white house and ask Bush not to launch a  false flag terror attack, suggesting that it might involve planes flying into buildings, and that the administration might trot out Osama Bin Laden for blame.

I think the reason I don't look at infowars.com more is that it is depressing and makes my blue-pill head hurt.   When I check his facts in areas I know about from independent sources(Politics, PM, 9/11, TPTB's motivation, and the Fed), he appears to be correct.  I have trouble accepting (or disproving) flouride poisoning, chem trails, cancer-causing substance in vaccines.

Alex claims TPTB plan a deliberate culling of 80 per cent of the world's population by  nuclear war(surprise from Russia, triggered by US invasion of Iran or triggered by North Korea taking on South Korea while China takes Taiwan)  and/or culling by some anthrax/leprosy/ebola created super virus.  The smaller population of serfs makes TPTB's  neo-feudal vision for the future more achievable.

He introduced me to Piers Corbyn (weatheraction.com) my favorite weatherman and my favorite paranoid Joel Skousen (worldaffairsbrief.com)  

Even if Alex Jones is right, my mind doesn't deal with that reality very well.

Nick

Bay of Pigs's picture

Peter Schiff

took a lot of heat for his own bad investment calls. I find that kind of sad, as he was 100% correct about the Housing Bubble and what it would do to the US economy. Stein, Laffer, Swonk and the rest of those douchebags should be banished from financial TV forever. 

They have zero credibility

brad_pitts_betterlooking_brother's picture

TF...

if you think you are going out to bury keynes you might want to do some prep by reviewing a few of the friday the 13th and halloween flicks first.  

he's been a tough kill.

question's picture

I remember reading that

Keynes recommended putting aside money when times were good for when they were not so good. That would have helped. I'm certainly not sophisticated concerning economic theory; free market seems better to me than any "managed" economy.

I have trouble figuring that anyone of TPTB have the best interests at heart except their own and in my darker moments (more often these days) I think they're to f'n dumb (greedy) to realize that they're killing the goose with the rape pillage and plunder they're engaging in.

Even viruses don't kill the host.

There is no brighter future ahead. (JMG)

Hunker down and survive.

Shill's picture

As Jesse noted in his most

As Jesse noted in his most recent post. Are we seeing Cap and Trade London style in Metals? Cap the rally and trade the market down. If so were in for a long run here folks.

http://jessescrossroadscafe.blogspot.com/

cpnscarlet's picture

@Nick Elway - Don't feel bad.

@Nick Elway - Don't feel bad. If HALF of what some people say is going on behind the curtain really is, none of us would "handle it well". I'm with you - maybe my "normalcy bias" simply won't accept the idea of some gov't cabal ordering an attack on Americans just to hide some banking records, etc, etc. On the other hand, some reasonable research I ask for (from established sources) to back up some people's claims about buildings collapsing never shows up. But that could be part of the conspiracy too, can't it??? I must continue to keep Alex Jones (and others) at arms' distance while I listen, but I also maintain one rule of life that "people are no damn good". I want to see some proof for all these doomsday scenarios, but I also need to remember that the evil in man can run very deep and to not be surprised by it. Hell, even simple human stupidity pushes the bounds of credulity on a daily basis.

But back to today's posts - Jones gives us his "Absolute Mega Red Alert" about a coming attack. Well, if you want to use rhetoric like that, something damn well better happen. And if it doesn't, the length of my arms magically grows! And then please don't tell me "We got it wrong. The Mayan Calendar ends next year!" or some such excuse.

Dr G's picture

Thoughts

This experiment will end. It has to. It will end in either one of two ways:

1) Everybody wakes up and realizes that changes need to be made. This will happen on Wall Street, Main Street, and in DC. Those changes will be painful. Those changes equate to everybody not being able to have all of the free stuff they feel they deserve. It means no more Medicaid. No more Medicare. No more food stamps. No more unemployment, etc. It also means no more funding for political pet projects. Only the most important things can receive funding. And, if there isn't any money left over after that, then the money is gone. No more. You can't print more. You can't electronically make more. You have to cut other areas and use those cuts to fund other programs. It is what those of us that follow a budget do. It is what those of us that own businesses do.

2) The experiment continues to play out and reaches it's full conclusion, which is a full-scale crash and burn. As a result, the economy/fiscal policy/monetary usage need to be reset. We start over. Slowly but surely, Keynesian will begin to creep back in and overtake our new economy. This will play out for another 40-60 years, until we crash and burn again.

I think #2 happens, but I don't know when it happens. It is getting close, but that is probably all just relative. These bozos have LOTS of ammo left for prolonging the life span of this failing system. Could fail next year and I wouldn't be surprised. We could also reach 2015 under the current system and still be kicking the can and I wouldn't be surprised. 2020 seems a little far off to me, but once again, I wouldn't be shocked if our economy is still puttering along then. It all depends on how much they print and what they do to manipulate the economy AND our perception of the economy.

As an aside, I think #1 might actually be MORE painful for the average joe than #2. I think that's why it really isn't even an option. Nobody is going to cut spending. Won't happen. Nobody wants to be the politician to let Social Security die, even though they should. They'll just keep taxing those that pay taxes, which will piss us off even more.

Kumanari's picture

Mahalo RaRA for the mind,

Mahalo RaRA for the mind, heart and soul illuminating vids. While some call for and we are probably headed for revolution(s), what is truly required is EVOLUTION and AWAKENING.

http://awakeningasone.com/

Tesla's picture

#2 Happens

@Dr G

I Know I've Heard That Before... Somewhere?

OC15's picture

Schiff

Always love watching the Schiff videos where he school idiots laughing at him.

Laffer: "Peter I'll be you a penny on this one that if you'll sign a letter saying that you're wrong you'll sign a letter to me that you were wrong on this"    WHAT???

Dr G's picture

Yes, what we call "Keynesian"

Yes, what we call "Keynesian" economics isn't entirely 100% correct. What is being utilized today is a hybrid economic theory.

For what it's worth, Schiff is a smart guy, but he isn't God. My buddy has $100k invested in his Euro Pac chosen foreign stocks blah blah blah thing, and it's down like 60% this year. Who knows. I guess long run it will be okay, but I guess it isn't good in the short-term with market fluctuations. That's all from my friend.

Schiff is also huge on mining stocks, which just give me a big headache.

JY896's picture

Conclusions

1) It is almost as dangerous to be right early, as it is to be wrong (Schiff). Though CapMgmt companies are not usually known for their forgiving nature WRT eccentric economic outlooks, and Peter still has his job.

2) If you kill off a sufficiently large % of the global population and industrial productive capacity, you solve the problems created by a depression caused by overleveraging. What a wonderful prospect to look forward to.

What neither of these address is what happens when the rubber band snaps, when the event horizon is passed, when the previously observed laws of 'physics' are no longer sufficient to describe events and forces around us. One way or another, the current stage of the experiment is definitely coming to an end. My only issue is that I don't even see a 'lesser evil' outcome to be strived for. Preparations are certainly in order.

FreedomWins's picture

Peter woke me up!

I have an account with EuroPac. I keep asking my broker, "How long does Peter have to be right before anyone listens?". He always says, "I don't know how he keeps doing it."

Everyone has to figure it out in their own way. Unfortunately, most won't until it's too late. Luckily, we all have TF and each other to rely on. Built up some fiat for a dip to buy more physical today. Physical in your hand is always better than red ink on a screen. Maaan, this is gonna be good!

backseatdriver's picture

Keynes

Keynes went to pain staking measures to be a glorified salesman of a doomed economic policy riddled with succinct and purposeful ambiguity that contributed to the hollowing out of our country and perpetual debt slavery. He should have been charged at the International Criminal level at the Hague along with all the other past and present fiat money policy makers for crimes against humanity.

He had to stand at the judgment seat after his passing. I hope he got right.

BSD

ewc58's picture

How 'bout Bill's opening quote for today's Midas Report?

Hi all, please remember how it works that bits from Bill Murphy's daily update can appear in Turd Town now and them.... It is only if we show support for GATA....please remember what GATA has done for you and for us all. Become a Le Metropole subscriber and to be able to get all this great insight and analysis for yourselves each day.

Please support Bill and GATA today.

October 17 – Gold $1675.50 down $6.30 – Silver $31.79 down 35 cents

PLAN A, PLAN B, PLAN C/P

The most dangerous man to any government is the man who is able to think things out... without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane, intolerable...H.L. Mencken

GO GATA!!!

Until The Gold Cartel went to their PLAN C assault on gold, the MIDAS headline was:

Gold And Silver Fare Well After Another Blatant Cartel Raid

That all changed when the cabal forces, determined to push their case, completed the Trifecta of their orchestrated attacks on the price.

The efforts made by The Gold Cartel to suppress the price, at the same time of day, have become more than tedious. Gold was on the move last night, making it to within an earshot of $1700, when The cabal forces did their thing again, knocking the price back below $1690 and then really went to work when the Comex opened.

After making a $1688 early high, the price was trounced all the way down to $1665 before it stabilized. The AM Fix came in at $1682, so that trouncing was a PLAN B one, courtesy of the bums. How many times does the same pattern have to occur before the likes of a Jeff Christian, and other GATA naysayers, wake up?

The early gold strength emanated from the growing realization nothing is really happening in Europe, as of yet, to deal with their growing fiscal problems. How that can be a surprise is a bit bewildering too. All they really get into is agreeing to discuss a plan to come up with a plan.

As a result of the inaction, the euro was under a good deal of pressure. There will be the usual commentary that gold sank due to the stronger dollar. But before The Gold Cartel went into action, gold was rallying with the stronger dollar and weaker euro.

Influenced by a faltering US stock market, silver was weaker than gold from the get-go, but didn’t fare badly in the end after making a $31.48 low. Once again it faltered after taking out key technical resistance at $32 per ounce. The same was true with gold after easily clearing its key technical resistance level at $1680.

***Course, all of that quickly changed in the Access Market. Gold is last at $1668 and silver is at $31.62. Both precious metals made new lows for the day before popping back a bit.

The gold open interest rose 3400 contracts to 439,978. The silver open interest went up 310 contracts to 101,637.

Behavioral Finance Report

*The Fed wants gold down to give them cover for some sort of massive stimulus to put some energy in our economy. If the price of gold is flying, talk will focus on the Fed not be vigilant about inflation.

*It seemed the orchestrated move by the PPT to goose the DOW and US stock market worked very well. There was a good deal of talk that the market was telling us all was going to be copacetic in Europe. Not so by a long short, at least not yet (see news below). PPT action can affect only so much. Reality came into play today and the DOW was hit pretty good.

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