patrick.net

Keynesian Krap, the mutts don't believe in Say's law either, but that don't make it so...

Video #1: I have a feeling that this is meant to bash Keynes, but fact is, it's the ending is just great! Though distorted with whinging over the poor, hardworking saver.

Keynes was actually not opposed to savings - it's a strawman invented by Austrians and Neoliberals. He was quite a big saver himself. What he drew attention to was the Paradox of Thrift, and he was ONE OF MANY to demonstrate that a huge chunk of investment capital comes from loans made by banks directly to an enterprise, and that All or even Most investment was NOT derived from savers in the form of buying stocks or bonds. In other words, Miser is not lending money to Brock, he's giving it to finance who is then over, under, or malinvesting that savings, but mostly in the form of loans.
http://socialdemocracy21stcentury.blogspot.com/2012/12/did-keynes-hate-saving.html

Video #2: Where the hyperinflation at? Because this video points to hyperinflation as the end game. Contrary to Neoclassicals/Austrians, the Western World has experienced relatively little inflation and very moderate Business Cycles for most of the post-WW2 period, as soon as Liquidation theory was abandoned. This is the exact opposite of what Liquidationists like neoclassicals and Austrians predict, and the exact opposite of Liquidationist policies in the 19th Century up to end of Hoover's Term.

The problem today is deflation, if anything.

Our current problem is a glut of capital, way in excess of what is needed to develop and grow the economy - this is why people keep buying USG Bonds at horrible interest rates, why we keep having real estate and commodity booms and busts, and it's directly caused by neoclassical/neoliberal anti-Keyesnian Policies. The only way to soak up this glut of capital is to increase wages to stimulate consumer demand via tax and spend, and most important of all, Wage Increases.

Here is where the glut of capital came from:

Keynes ruled in the Trough of this Chart; Liquidationism and Austerity ruled on the margins.

Here is public debt in the allegedly horrible 60s and 70s in the UK, where Keynesian Communists ran the show before the Glorious Thatcher saved Britain with massive social program cuts, union busting, and tax cuts:

As you can see, Public Debt dropped every year as the UK paid of WW2 era debts, despite building millions of council homes, paying unemployment, instituting a National Health Care System, etc.

If you watch any video, watch this one:
https://www._JoYCBP6LQI
and this one:
https://www.qOP2V_np2c0

The glut of capital came from the QEs, what is so hard to understand about that?

In fact where ever the government has intervened in the market it has created a glut of capital as with war, student loans, affordable housing, ethanol, healthcare, etc etc

indigenous says

The glut of capital came from the QEs, what is so hard to understand about that?

The glut of capital was there before, but the QE made it WORSE. The QE didn't go to Manufacturing or Infrastructre, but to defend directly the banks' balance sheets.

If we had real Keynesianism, you'd have seen thousands of new highways, rebuilding old bridges, slum clearance, new Park Bathrooms, etc. etc.

QE combined the worst of Liquidationism with the worst of Keynesianism. It printed the money, but it didn't direct it toward infrastructure or productivity; nor did it let the prices of housing and other iron costs like food collapse like what would have happened under Liquidationism, yet it allowed businesses to shed employees and reduce demand.

In fact we saw a commodity spike across the board after the Financial Crisis!

thunderlips11 says

The glut of capital was there before

The notion that the quantity of money needs to change is specious from the get go. It is also inheritant with fractional reserve banking which is also specious.

thunderlips11 says

The QE didn't go to Manufacturing or Infrastructre, but to defend directly the banks' balance sheets.

Yea no shit, it is called malinvestment. The Fed has to defend the untenable position that it can change the business cycle, instead it perverts and slows the vital function of the business cycle that clears businesses that no longer have value. This is why this has been the weakest economic recovery in the history of the US.

thunderlips11 says

If we had real Keynesianism, you'd have seen thousands of new highways, rebuilding old bridges, slum clearance, new Park Bathrooms, etc. etc.

All of those would have also been malinvestment just as they were when FDR did them.

thunderlips11 says

It printed the money, but it didn't direct it toward infrastructure or productivity; nor did it let the prices of housing and other iron costs like food collapse like what would have happened under Liquidationism, yet it allowed businesses to shed employees and reduce demand.

Once again the Fed cannot do anything but impede the vital necessity of the business cycle clearing the dead wood, of course it was malinvested.

thunderlips11 says

In fact we saw a commodity spike across the board after the Financial Crisis!

There was no change in the price of commodities only the value of the dollar.

indigenous says

All of those would have also been malinvestment just as they were when FDR did them.

Nominated. Investing in infrastructure is almost never a bad investment.

thunderlips11 says

If you watch any video, watch this one:

The Steve Keen video is really good. I do not know whether his non-linear dynamic model is the absolute gospel, and it is likely that it is not(*), but at least it drives the point home that economic systems can have lots of unstable (or semi-stable) equilibria.

(*) For example, maybe Steve Keen ought to come up with a model that incorporates QE and not just interest rates. Also one missing factor seems to be some sort of variable mal-investment ratio.

Dan8267 says

15 minutes: Keynesian Theory, The Business Cycle, and the Fed

The original videos of the thread did not impress me much. The first one was a complete mis-characterization of Keynes, and typical right-wing propaganda. Full of strawman arguments against what is NOT keynesian.

Everybody quotes Keynes about building pyramids, but what he said was the best use of public spending would be slum clearances (replaced by modern homes), infrastructure, etc. however failing that, Pyramids would be better than nothing.

The funny thing is that all the Conservatives who hated Council Homes, all the Free Market critics who hated Affordable Housing, brought them to rent and now advertise how great they are. The bones are exactly the same; the only thing that changed is maybe they replaced the formica counter-top with a granite one.

Call it KKKrazy says

Imported items are truly overpriced, but I don't think it's mostly due to the MW level (maybe Bob will weigh in on this): a Jeep Grand Cherokee is 50k, and so is a 22' travel trailer. OUCH! But what passes for a $20 bottle of Pinot or Shiraz or Cab is way better than what you get for $20 in the US. Don't even get me started on how much better the coffee is made over here. Just ask Starbucks how that turned out for them.

Oz (and NZ) are expensive mostly because they are lightly and sparsely populated. Buying in small quantities and shipping small quantities long distances raises prices a lot. There are probably individual walmarts in the US that sell more than the entire south island of NZ or some of the smaller states in oz. Nz has about the population of oregon and oz has about the population of florida so there isn't a lot of buying power available to the "big" chains in either country.

This is really shows up living on the south island of NZ where the same exact goods in the same stores are 50% higher than the north island. Everything has to be shipped across the cook straight at 5k per container, then on to christchurch to be distributed around the island. I lived less than 15 minutes from the Interislander terminal and everything I bought had to go past me on a train traveling 5 hours to CC, unloaded, sorted, reloaded onto trucks, then shipped 5 hours back. Things like $50 for a gallon of antifreeze are really shocking. The huge distances in oz have the same affect. Australia is almost as big as the US with 6% as much population.

This doesn't just apply to imported items. You can buy NZ lamb or australian beef cheaper in the US than in NZ or oz. I can buy the same bottle of wine in price chopper in new england cheaper than I could when the winery was literally down the street from me living in victoria. It's actually cheaper to transport large quantities to the highly efficient US distribution system than to break it down and truck small quantities around to a bunch of small grocery stores in widely scattered small towns.

Another factor is geoblocking, you pay more online because of where you are. I used proxy servers to beat this when I lived in NZ and Oz. The difference in price from the same item from the same retailer using 2 different IP addresses could be amazing. Itunes downloads in oz are 50% more expensive than in the US for example.

The high average wages increase prices to some degree.

The very high cost of commercial (residential too) real estate affects the costs and prices of anyone with a physical presence in either country. Both countries have an urban boundary system that severely restricts build able land making it very expensive. Houses and buildings are built in ineffecient tiny numbers, almost always individually custom designed. The idea of using a stock plan or building a simple rectangular box horrifies people in both countries. High labor costs, really high material costs (I remodeled a house, prices were absurd), and astronomical government fees (think 10-20k for residential building permits for example) drives the prices of houses and commercial buildings through the roof.

Oddly enough import duties aren't really a big factor. If I remember right duty is something like 0-10% in Australia, with the average right at 5%. Many items aren't subject to duty. NZ is a couple percent higher.

GST (aka sales tax) is 15% vs 5-7% in most states. This is included in the prices instead of being rung up at the register separately which makes things look more expensive if you are used to shopping in the US.

Call it KKKrazy says

Thanks, bob. I figured transpo was the biggest factor in cost of goods, but $50 for a gallon of antifreeze is tough to fathom. When I saw a 21.5' travel trailer (with no slide-out) heavily advertised for 50K I was gobsmacked. Gas at $1.36 a liter is well over $5 USD a gallon. But I did have a ride in a Toyota van I don't see in the US: 13-passenger, diesel, 35 mpg.....so, there's that.

Travel trailers are big and very expensive to ship, plus they have to be wired 220 and meet local electrical codes. Australia has a moderate case of not invented here that gets in the way of common sense frequently. NZ is 10 times worse. In addition to not invented here kiwi's love clever unusual designs. Practical usage or the fact that many things are designed the same way around the world because it works is not a factor. We called it kiwi clever. It dates back to the 30 years or so of hard socialism when you simply couldn't import anything and everything was a local cob job.

The HiAce van is ubiquitous everywhere in the world except America. I've seen as many as 21 passengers carried in places like Domincan Republic. They strip out all of the carpet, headliners, armrests, and panels to gain a few extra inches of room to stuff more people in. The conductor/ticket seller actually hangs outside the whole trip. My hiace got 8-9 ltrs per 100k, the common measurement everywhere except the US, which is about 25-28mpg.

Call it KKKrazy says

.I had rack of lamb for lunch in Barossa today and it was the best lamb I've had in a decade and a half: $32AUD. I'll take it gladly.

I really wanted to see adelaide and the surrounding area's but didn't get the opportunity even though I wasn't that far, by australian standards away at about 1000k to the east in the gippsland area. Drank a lot of barossa wine instead. Enjoy.