Posted tagged ‘Keynesian economics’

A Keynesians Dream, Cruise Missile Strikes In Syria.

September 6, 2013
A Raytheon Tomahawk Block IV cruise missile du...

A Raytheon Tomahawk Block IV cruise missile during a U.S. Navy flight test at NAWS China Lake, California (Nov. 10, 2002) (Photo credit: Wikipedia)

THE KEYNESIAN MAGIC OF GOVERNMENT SPENDING

If we believe Keynesian economics, cruise missile strikes will help our economy, and the Syrian economy. First let’s look at how it is supposed to help our economy. By launching a couple hundred cruise missiles at roughly $1 million a pop, the Government will have to spend over $200 million to replace the missiles that are consumed in the attacks. Cruise missile maker Raytheon will be the beneficiary of the spending as they will get paid to produce at least 200 cruise missiles. Raytheon’s employees, stock holders, and the companies who supply parts to Raytheon, for these missiles, will have more money to spend, and as the money circulates through the economy it will stimulate even more consumption. As we all know consumption drives the economy, and if we can stimulate consumption through government spending there will be never-ending economic growth.

The same basic principle is in play as we look at how the Syrian economy will be helped by our cruise missile strikes. What ever our cruise missiles destroy, has to be replaced, whether it is buildings, vehicles, military equipment, and yes even the chemical weapons. Part of the collateral damage will be people, but if you look at it unemotionally, employment will improve because unemployed people will have to take the place of the employed who died. Employment will also improve as people will have to be employed to rebuild what was destroyed by the cruise missile strikes. Since Government only spends on important projects, for the common good, and the private sector spending is for frivolous things that individuals desire, our targeting of Government property will have an optimal stimulative effect for the Syrian economy.

We are consuming missiles when we launch them, and as we know consumption grows the economy. We could be selfish and create a stimulative effect for our economy only, if we launched these missiles into the ocean or a deserted place on the globe, but we are creating a secondary stimulative effect by dropping these missiles on real things. Fortunately for the Syrians we are targeting them, we could have chosen numerous other countries to stimulate with our cruise missile strikes. (more…)

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Charles Hugh Smith, Hits It Out Of The Park With These Articles.

May 6, 2013
Thinker

Thinker (Photo credit: dSeneste.dk)

Lets do some heavy lifting to start the week. Two weeks ago, Charles Hugh Smith, at oftwominds.com, had three outstanding articles that built on top of each other. For him they were relatively short, but as usual were filled with great insights. He talks about what politicians, bureaucrats, central bankers, and intellectuals not only think; but also talks about the incentives and constraints under which they are making decisions: Why their policies of counterfeiting money for funding stimulus programs, bailouts or for increasing their sacred GDP numbers, will continue until economic reality forces a change: Why China and the US are in similar situations, even though (more…)

Murray Rothbard: When Keynesianism Collapsed! Economists Are Still Trying To Preform CPR On This Corpse.

January 16, 2013

One of the great communicators of complex economic principles is Austrian Economist Murray Rothbard. You won’t find a better step by step explanation of economics than his book Man Economy and State.

I got this video from EconomicPolicyJournal.com.

For more analysis read this article titled, “The Many Collapses of Keynesianism”, by Lew Rockwell at Mises.org.

If you are wondering where inflation is today read this article titled, “Where Is The Inflation” by Mark Thornton at Mises.org.

Inflation doesn’t appear magically for no reason, and then the Federal Reserve rides in on its white horse and saves us from this beast. Inflation is caused by expanding the supply of money. The beast of inflation is caused by the savior on the white horse (more…)

What Comes First, Production Or Consumption.

November 20, 2012
Kindof a visual pun that I've illustrated...

Kindof a visual pun. Which came first?  (Photo credit: Wikipedia)

What drives the economy, supply of or demand for goods and services. Does the economy grow because we consume more or can we consume more because the economy grows. This article by Mark Skousen title, “Consumer Spending Doesn’t Drive The Economy, Investment Does”,   explains the public’s perceived chicken or egg conundrum about production or consumption. This is not a puzzling question at all, the answer is very logical and easy to understand. Consumption happens at the end of the production process. You can’t consume something that does not yet exist, and the only way a consumer’s good can exist is if someone produces it. Production is the act of creating wealth, while consumption is (more…)

Keynes vs. Hayek Round II, The Fight Of The Century.

November 19, 2012

Mises states, “The issue is always the same: the Government or the market, there is no third solution.” This has been the fight of the century, and will be the fight of the next century. Top down central planning by the state vs, bottom up voluntary cooperation in the market.

Central planning by the State sounds so logical and reasonable if analysed on the surface. Spending creates demand and people will produce to supply this demand. That’s simple and easy to understand on the surface, but a deeper analysis reveals that the structure of production is a very complex process. This complex structure of production was created by the spontaneous ordering processes in the free market not (more…)

Government Intervention Distort’s Market Signals, Unintended Consequences are the Result.

October 23, 2012
Unintended Consequences by John Ross, 1996

Unintended Consequences by John Ross, 1996 (Photo credit: Wikipedia)

When Government tries to steer the economy, unintended consequences happen because individuals don’t act the same after Government steering as they did before. The only way central planners have a chance to make their plans work is if people are made to act the way planners want. The only way to make people obey is to have a totalitarian state which can enforce the rules of the central planners. Even though our individual freedoms have been slowly taken away over the last fifty years, enough of a free market remains allowing us to make enough individual decisions, which ultimately thwarts the plans of the planners. Each of us (more…)