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The monstrosity of Kensyian economics and the future economic disaster

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posted on Jul, 19 2018 @ 08:36 PM
So Kensyian economics is basically how Hitler and FDR brought their respective countries out of economic depression in the 1930's.

Kensyian economics is essentially what Trump is doing. Cutting taxes while increasing government spending.

Keynesian economics is an economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed by the British economist John Maynard Keynes during the 1930s in an attempt to understand the Great Depression. Keynes advocated increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the depression. Read more: Keynesian Economics Definition | Investopedia Follow us: Investopedia on Facebook

These are the governmental interventionist policies that I believe are destroying our nation economically. It gives incompetent government employees the power to decide winners and losers in the market and create massive inflation by subsidizing the economy in various forms.

According to this classical theory, if aggregate demand in the economy fell, the resulting weakness in production and jobs would precipitate a decline in prices and wages. A lower level of inflation and wages would induce employers to make capital investments and employ more people, stimulating employment and restoring economic growth. The depth and severity of the Great Depression, however, severely tested this hypothesis. Read more: Keynesian Economics Definition | Investopedia Follow us: Investopedia on Facebook

In this theory a deflationary period (what we SHOULD be experiencing and are experiencing in some areas) is bad. I think they are good because it keeps the market within reach of those who can innovate. I'm not an economist though so feel free to add to that.

For example, Keynesian economics refutes the notion held by some economists that lower wages can restore full employment Read more: Keynesian Economics Definition | Investopedia Follow us: Investopedia on Facebook

Low wages actually create demand in the labor market because more people will be hired leading to higher wages for the skill based economy. This would actually be a good thing. By cutting out all of the government subsidization this will slow down inflation because prices would have to actually be within reach of the average consumer. Look at the college student loan crisis we have now. That's due to subsidy from the government. Get rid of the subsidy and the prices will drop dramatically and colleges will only offer successful programs that lead to higher incomes. They will also be forced to produce more competitive programs to attract more talent. Not like the cookie cutter system we have now.

Instead, he envisaged economies as being constantly in flux, both contracting and expanding. This natural cycle is referred to as boom and bust. Read more: Keynesian Economics Definition | Investopedia Follow us: Investopedia on Facebook

This is what we have currently with the Fed raising and lowering interest rates to inflate/ deflate bubbles to create the boom bust cycles the wealthy elite so love to get incredibly rich off of and consolidate power. I would argue this is the real reason behind this system.

In response to this, Keynes advocated a countercyclical fiscal policy in which, during the boom periods, the government ought to increase taxes or cut spending, and during periods of economic woe, the government should undertake deficit spending Read more: Keynesian Economics Definition | Investopedia Follow us: Investopedia on Facebook

US deficit spending reached $668 billion in 2017

This is currently what we are doing, spending our way out of the economic depression we have been pretending doesn't exist as long as our team is in office.

Keynes also criticized the idea of excessive saving, unless it was for a specific purpose such as retirement or education. Read more: Keynesian Economics Definition | Investopedia Follow us: Investopedia on Facebook

This is wrong. The more I can save the more I can invest in equity and have actual assets that I'm not indebted to. This creates massive individual strength and leverage for average citizen's and that would take power away from government. As long as we need government to service and subsidize our debt, they own us.

We follow their rules.

Keynesian economics focuses on demand-side solutions to recessionary periods. The intervention of government in economic processes is an important part of the Keynesian arsenal for battling unemployment, underemployment and low economic demand. The emphasis on direct government intervention in the economy places Keynesian theorists at odds with those who argue for limited government involvement in the markets. Read more: Keynesian Economics Definition | Investopedia Follow us: Investopedia on Facebook

This has been our government strategy since FDR. His social welfare programs and New Deal are Kensyian in nature. They were also disasterous economic policies that persist until today. These are also directly juxtaposed to a free market capitalist system.

Lowering interest rates is one way governments can meaningfully intervene in economic systems, thereby generating active economic demand. Read more: Keynesian Economics Definition | Investopedia Follow us: Investopedia on Facebook

Otherwise known as quantitative easing which the Federal Reserve launched 3 times during Obama's presidency. These policies obviously failed because the government cannot dictate the markets. Only we can do that.

Prices also do not react quickly, and only gradually change when monetary policy interventions are made. This slow change in prices, then, makes it possible to use money supply as a tool and change interest rates to encourage borrowing and lending. Read more: Keynesian Economics Definition | Investopedia Follow us: Investopedia on Facebook

This is currently happening happening in the housing market.


posted on Jul, 19 2018 @ 08:36 PM
The easy money lending policy of SallieMae and the various forms of subsidy such as first time home buying options is just one example.

We can also see this happening the auto loan industry with the current subprime auto loan bubble that's been forming for quiet a while.

This is creating massive inflation in housing cost, student loans, and car loan industries. This is also totally deflating the value of the dollar causing more inflation, also the government is continuously having to raise taxes or hidden taxes to continue to cover the rising cost of doing the job they are actually suppose to be doing which is fixing roads and offering emergency services. This is a total disaster in the making. Massive inflation is coming.

The actual inflation rate is much higher than the government released CPI numbers being talked about in the media and by the Fed.

If the Burrito Index had tracked official inflation, the burrito at our truck should cost $3.38 — up only 35% from 2001. Compare that to today's actual cost of $6.50 — almost double what it "should cost" according to official inflation calculations.

According to official statistics, inflation has reduced the purchasing power of the dollar by a mere 6% since 2011: barely above 1% a year. We've supposedly seen our purchasing power decline by 27% in the 12 years since 2004 — an average rate of 2.25% per year.

Unbiased private-sector efforts to calculate the real rate of inflation have yielded a rate of around 7% to 13% per year, depending on the locale — many multiples of the official rate of around 1% per year.

That's MASSIVE inflation. So it's pretty obvious we are approaching a bust cycle. IMO this will be brand Trump Crash but it won't be totally Trump's fault. It's over a century of bad economic policy.

The great part about these bust cycles is that if you position yourself accordingly in commodities markets and with physical assets that produce value you can REALLY come up on the next up swing. This is what the smart money is currently doing. That or play the currency game.
edit on 19-7-2018 by toysforadults because: (no reason given)

posted on Jul, 19 2018 @ 09:54 PM
a reply to: toysforadults

So Kensyian economics is basically how Hitler and FDR brought their respective countries out of economic depression in the 1930's

Hitler brought Germany out by gearing up for war
FDR brought the US out in the same fashion.

posted on Jul, 19 2018 @ 10:00 PM
a reply to: toysforadults

Good one...S&F

We know the bubble will burst sooner rather than later. What are you going to do about it.
It's the social repercussion that worry me.
edit on 19-7-2018 by olaru12 because: (no reason given)

posted on Jul, 20 2018 @ 01:23 AM
Stick a fork in it, its done. Not only that its been done for a long time. But not quite well done. Medium rare some would call it. But in reality maybe burned to a crisp being on the grill for so long. But people will still eat it up.

And that is my description on the economy. I am quite sure it will mozzy and hobble on along as it always does. Consumer economy right? I think Trump like George Bush did should go on TV and tell people to go shopping. Its a national pastime after all, and not only here, but a world wide.

posted on Jul, 20 2018 @ 10:06 AM
Which kind of Keynesian economics?

New? Neo? Post?

There is a reason 'Keynesian' economics gets used.

It works.

posted on Jul, 20 2018 @ 03:53 PM
The thing about Keynes was his ideas were thought out in a closed system. The government would borrow in the lean years to boost the economy and then pay back those loans in the prosperous years. He was basically borrowing from the future to ease the present.

I don't think we have anything close to a closed system anymore. Our bond issuance is merely a small percentage of money being created out of thin air. They are pretending to follow some form of checks and balances so our faith in our fiat remains somewhat stable. That is all that gives our fiat power, our belief in the system.

Just like people arguing against capitalism. We haven't had real capitalism in this country for decades, maybe even centuries.

Even in a closed system, I think Keynes was still wrong. There is nothing wrong with lean times or depressions. Those times are when the malinvestments are exposed and default/collapse. The problem is, we don't allow that anymore. Those people that made the bad investments are now politically protected. They should have been bankrupt at the least and probably should be in jail for pure fraud. Did we allow that to happen? Hell no, we as the tax payers bailed them out. The majority don't understand, there was no large cry of anguish from the masses when we gave these vampires 300+ billion (probably trillions today) dollars to make them whole.

The majority are too distracted in watching the political theater show that doesn't amount to a hill of beans. Our education centers ensure that the majority will never understand.

posted on Jul, 20 2018 @ 04:33 PM
a reply to: ClovenSky

There is a hell of a lot wrong with depressions for those affected.

Taxes give fiat currency value (same as they did under a gold standard) , that's a lot more than just belief.

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