on Keynes and Laffer

Stock Markets Roiled by Chaotic Italian Politics - Barrons.com

CO wrote:
"...Keynesian economics is spot on and has just been proved by Europe and the UK and other misguided "austerity" worshipers."

Response:


Dear Charles,

I would beg to differ with your Keynesian affirmations. In fact, I would suggest the data show just the opposite.

There is a distinct lag between the behavior one would have expected in terms of an economic rebound and the job creation that has actually taken place.

As for Europe, they are just showing the latter stages of the Keynesian failure - i.e. that high taxes and reliance on government instead of market forces of supply and demand, eventually fun out of other-people's-money.

I'd suggest the evidence of the last few years validates Laffer's position that there is a limit as to how much of productive people's money government can take and that there are downsides (e.g. low sales) when government distorts the prices of goods and services (i.e. VAT rates of 23%).

Thoughts about GI College Graduates in the 40's and 50's and those of today.

I was thinking about how after WW II in the US, they had a "GI benefit" education program that basically had the government pay the cost of college for any soldiers mustered out. 

Thus, in the 1950's these kids got out of college with no debt.

Today, kids are getting out of college owing huge amounts of money and if their parents co-signed, the parents are on the hook for repayments. There is no limit on the time period to have to repay the money and the debt collectors can easily attach salaries, tax refunds and social security. (In other words, a kid gets out of college; his/her parents co-signed; the kid can't get a job; the debt collectors go after the parents; they could start taking the parents social security or salaries.

It is a horror and meanwhile the kids are being asked to pay taxes to support lavish government retirement benefits (public unions) and basically free medical care for the elderly. And, because the government is anti-business, the only reason the jobless rate isn't 15% or more is that huge numbers of people have (at least officially) dropped out of the work force.

Back in the 1950's, kids could think of starting families, buying houses, etc.

Today, they can't get jobs, taxes are up and going higher to pay for retirees and they have too much debt to buy a house.

Obama's wrongheaded policies: Russia Protects Against Devaluation While Others Don't - Barrons.com

Russia Protects Against Devaluation While Others Don't - Barrons.com

statement by DR: "You should be thankful for those large deficits for without them the US and most likely the whole world would be suffering from a second Great Depression. "

response:
"You clearly dismiss anti-business regulatory and tax policies as any causative factor for economic decline - but to do so, you also have to dismiss facts staring you in the proverbial face.

To wit, government is spending too much and spending the money on consumption by taking the productive resources from some members of society to give to others who are unable to produce and contribute to society in the same degree they want to consume what society is producing.

Austerity - and as Obama stated yesterday - I'm having government spend more without any more debt. Are we blind to his plans to take it from the supply-demand private economy through higher taxes!

You should glance at: "Extraordinary Popular Delusions And The Madness Of Crowds
By Charles MacKay
1841"

The head of the Dallas Fed recommended this book (free on line) as how things never really change.

http://vantagepointtrading.com/wp-content/uploads/2010/05/Charles_Mackay-Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds.pdf