Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold Watch Out as Price May Be Staging New Momentum Base In Preparation For A Big Move Upwards - 18th May 21
Why the Demand for US Real Estate Licenses May Soon Fall into a Sinkhole - 18th May 21
Semiconductor Equipment Maker ASML Is at the Center of the Global Chip Shortage - 18th May 21
Could This Be The Hottest Investment Sector For 2021? - 18th May 21
TESLA Tech Stock Bubble BURSTS! Stock Price Heading for CRASH to below $400 - 18th May 21
The Most Exciting Biotech Stock Of The Year? - 17th May 21
Gold Mining Stocks Fundamentals - 17th May 21
Junior Gold Miners Should be Rallying – What’s Holding Them Back? - 17th May 21
Stock Market - Should You Be In Cash Right Now? - 17th May 21
Learning the Financial Markets - 17th May 21
Is Stock Market Selling Madness About Over? - 16th May 21
Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
Budgies Birds of Paradise Indoor Grape Vine Singing, Chirping and Flying Parakeets Fun 3D VR180 UK - 16th May 21
Wall Street Roiled by Hot Inflation Data: Is This REALLY “Transitory”? - 16th May 21
Inflation Going Stag - 16th May 21
CHIA Coins After 1st Week of Plotting 140 Plot 14tb Farm. Crunching the Numbers How to Win - 15th May 21
Tips to Create the Best Cross-Functional Teams - 15th May 21
Gold: Lose a Battle to Win the War - 14th May 21
Are You Invested in America’s “Two-Hour Boom” Fast Shipping Stocks? - 14th May 21
Gold to Benefit from Mounting US Debt Pile - 14th May 21
6 Solid Signs You Should Have Your Smart Device Repaired Right Away - 14th May 21
Ways to Finance Your Business Growth - 14th May 21
Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
How Much CHIA Coins Profit from 100 Plot 10tb Farm? Hard Drive Space Mining - 13th May 21
Stock Market Bulls Getting Caught in the Whirlwind - 13th May 21
Legoland Windsor Mini land and Sky Train Virtual Tour in VR 360 - UK London Holidays 2021 - 13th May 21
Peak Growth and Inflation - 13th May 21
Where’s The Fed? Watch Precious Metals For Signs Of Inflation Panic - 13th May 21
Coronavius Covid-19 in Italy in August 2019! - 13th May 21
India Covid Apocalypse Heralds Catastrophe for Pakistan and Bangladesh - 13th May 21
TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
Gold Price During Hyperinflation - 12th May 21
Stock Market Extending Phase Two? - 12th May 21
Crypto 101 for new traders – ETH or BTC? - 12th May 21
Stock Market Enters Early Summer Correction Trend Forecast Time Window - 11th May 21
GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
Cathy Wood Bubble Bursts as ARK Funds CRASH! Enter into a Severe Bear Market - 11th May 21
Apply This Technique to Stop Rushing into Trades - 10th May 21
Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

More of the Same From the Keynesians in 2014

Economics / Economic Theory Jan 23, 2014 - 03:41 PM GMT



Harry Goslin writes: The first rule I teach my economics students is that when the economy fails, it’s usually safe to blame the government. To paraphrase Winston Smith in 1984: If we accept that the state is the source of economic misery, “all else follows.”

As a science, economics is really not that difficult because it encompasses decisions we make every day that impact our well-being and the well-being of those around us.

This system of natural law that we refer to as economic law governs economic activity, and much like the laws of physics that govern the world and universe in which we live, these laws are absolute and can only be manipulated at great risk. They cannot be negated.

In economics, legislation and regulations cannot fundamentally change the reality of economic law. If we bend them, reality snaps back with a vengeance, and the corrections will often be unpleasant.

Speaking in the 1920s, Ludwig von Mises said that any “correction” following an artificial boom period must be equal to or greater than the expansion that created it in order to fully liquidate the asset distortions amassed during the boom period. At the end of the 1920s he was proven correct.

In the 1930s, the Temple of Macroeconomics was built in honor of the new Zeus, John Maynard Keynes, and economic law was mostly cast aside. Washington, D.C. became the final word in even the smallest transactions in the economy.

Since then, unfortunately, Keynesian economics has become deeply entrenched in our collective thinking. Too many Americans trust the pronouncements of elitist Keynesians explaining why jobs and higher wages are scarce, or why prices rise or fluctuate unexpectedly. We then wait hopefully as the high priests of Keynesianism decree the solution to these vexing problems. The catechism has been established that only they can exorcise the maladies of a bad economy.

Their solution? Paper over the problem with more money creation or boost GDP through more government spending; understate inflation and report that the economy grew by “X” percent, and start throwing the confetti.

Looking forward to 2014, we can see that the Keynesians will be working their craft once again as this new year unfolds. recently posted two “list” articles: one on eight things that will cost more this year and one on eight things that will cost less.

The expectation for 2014 is that wages will increase by an average of 3 percent. But price inflation is also expected to rise by about the same amount (according to the official understated rate).

GDP is also expected to increase modestly in 2014 as consumer confidence grows. Yet GDP is a grossly simplistic calculation that makes generating misleading statistics easier. One of the components of GDP is government spending. So, if GDP growth is falling short of predictions, all government needs to do is ramp up spending and the economy “grows.”

Also this year, the cost of lending is expected to increase once the Fed reduces its purchases of government bonds. If that does happen, artificial inflation of the stock market stops, followed by much whining on Wall Street.

Housing costs are expected to rise this year, which is not surprising given that The Fed has been trying to re-inflate a housing bubble since 2008.

According to the list, food is going up, too. And the real impact will never be fully acknowledged by the government because the government doesn’t include the cost of food in its “official” inflation calculations because the price of food is allegedly too volatile.

Thanks to Obamacare employer-provided healthcare costs will increase well beyond what can be expected due to yearly government-caused inflation.

Taxes are also expected to increase, but only for the “rich” (assuming you don’t count Obamacare penalties as taxes) so that will be okay for most voters.

Three of the items on the things-to-cost-less list, tablets, smartphones, and 3D printers, are coming down because what little remains of the market has been driving those prices down year after year. Given the increasing costs for so many essentials, however, it seems less than satisfying to celebrate what common sense, and a basic non-Keynesian understanding of economics, would predict anyway.

These economic maladies we will face in 2014 are the result of Keynesian economic policy, which is as revered in Washington as ever. The inflation we’re facing stems from the Fed and its money-printing/bond-buying scheme, and the latest distortions will be borne out this coming year, piling on top of those distortions already crippling any recovery we might see. As the recovery falters, the Keynesians will point to government as the solution. As in the past, they will continue to make the economy worse and real recovery impossible.

It’s as predictable as 2 +2 equaling 4. At least Winston Smith gets it.

Harry Goslin teaches American history and economics to high school students in eastern Arizona. A long-time devotee of the Austrian School, he has been working to undermine the system "a brick in the wall" at a time for 20 years. See Harry Goslin's article archives.

You can subscribe to future articles by Harry Goslin via this RSS feed.

© 2014 Copyright Harry Goslin - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in