Keynesian Economics Backfired?

[Aster]

As we all know, inflation is close to 10% in America. One of the contributing factors of this was that we printed an exponential amount of money in the form of stimulus checks. Before we dicuss that topic however, some understanding needs to be articulated.

What is Keynesian Economics?

 

 

Keynesian Economics is a government intervention practice that came about during The Great Depression where Classical Economics was not effective. Kaynes - the thinker of this economic          practice - stated that there needs to be an increase in government intervention in the economy. One way he portrayed this idea was an increase in Fiscal and Monetary Policy. Fiscal Policy                  is a flucuation in taxes(either which way), and/or government expenditure(spending money on infanstrucute projects as an example). Monetary Policy mainly practices a change in intrest rates. 

There are also two other parts of Monetary Policy that are not needed for an understanding in this scenario. Overall,  the practice was to stimulate the economy and avoid/get out of a recesion. In other words: more government intervention.

 

For anybody trying to critique this, I was articulating the basics of this economic practice for people who didn't understand. This was reductive purposely, not by mistake.

 

 

What policy mainly did the U.S. Government put into practice?
 

 

This would be an increase in Fiscal Policy. By the U.S. Government spending money on its citizens to have an increase in demand of goods and necessities, it was able to "avoid" a recession for          the time being. Due to Covid, unemployment was natrually higher than usual, which caused an inability for people to purchase basic goods and neccessities, as stated above.                                          The Federal Government's initative was to keep the increase of demand so money kept flucuating via the economy. This has worked for the time being.


This leads us to the big question: Did Keynesian Economics backfire? 

Right now, the economy is too rampid. Which is why the Federal Reserve is increasing intrest rates, to deter people away from spending and buying. This has not seemed to be effective, however.

Before anybody starts commenting on this, I have some graphs and statistics.

https://www.statista.com/statistics/1107572/covid-19-value-g20-stimulus-packages-share-gdp/

https://mediabiasfactcheck.com/statista/ 

 

https://www.pewresearch.org/fact-tank/2022/06/15/in-the-u-s-and-around-the-world-inflation-is-high-and-getting-higher/ft_22-06-08_globalinflation_1/

https://mediabiasfactcheck.com/pew-research/

 

Compare these two graphs/statistics, you'll see some of the countries that did/did not provide stimulus packeges have more/less inflation. 

This leads us to another question, then. Is inflation at the fault of Keynesian Economics? 

To leave you off, here's an opinion from Paul Krugman: https://www.nytimes.com/2022/07/14/opinion/inflation-markets-recession-prices.html?searchResultPosition=2.

[All Ts]

They would have to increase rates************* quite a lot to dampen spending, especially when the measures of inflation are complete horseshit & the federal reserve does not take it's own standards seriously enough to act when they think inflation is transitory. Our economy is fucked, but so are others who have followed the same model & we'll all suffer different consequences as we've already seen. COVID and the Trade War + the reserve increasing rates popped the bubble we've been building sitting at near 0% rates since 2000's. The government has also been recklessly spending across the board, both sides are guilty of it.

 

Whether it's a tax cut without proportional budget cuts or a huge program. The idea that the US economy will off ramp & we'll all be wicked educated with our tons of student debt, low interest rate houses where you rent out to a tenant (free money dude!1!!!1!), and all of this shit we've been "investing" in has been worth it is such a pipe dream. Our government stopped being about making a system that works for everyone a long time ago. It's not explicitly socialist leaning or overtly capitalist either, I don't think that government bailing out huge businesses is something overtly capitalist especially when the systems we set up are pilfered in fraud during a global pandemic XD. People who needed that COVID relief for their businesses couldn't get jackshit sometimes and meanwhile criminals stole billions & billions of dollars from it.

 

Our system is like this because the narrative is extremist & so extremist that is has literally whittled away the concept of our money as something that will become devalued & at the same time there are no protections for those who are going to be boxed out of the economy while the government swoops in to save those who are deemed too big to fail. All in all though, it's important to remember that this time when we're fucked we're already so close to 0% rates and so terribly behind real inflation that the kind of shit that we're going to experience is going to make the peak of the 1970's look like nothing lol. So much more is going to bleed from tech than already has, it's going to be  historic.

 

also Keynesian*

[TheZZL]

1 hour ago, All Ts said:

They would have to increase rates************* quite a lot to dampen spending, especially when the measures of inflation are complete horseshit & the federal reserve does not take it's own standards seriously enough to act when they think inflation is transitory. Our economy is fucked, but so are others who have followed the same model & we'll all suffer different consequences as we've already seen. COVID and the Trade War + the reserve increasing rates popped the bubble we've been building sitting at near 0% rates since 2000's. The government has also been recklessly spending across the board, both sides are guilty of it.

 

Whether it's a tax cut without proportional budget cuts or a huge program. The idea that the US economy will off ramp & we'll all be wicked educated with our tons of student debt, low interest rate houses where you rent out to a tenant (free money dude!1!!!1!), and all of this shit we've been "investing" in has been worth it is such a pipe dream. Our government stopped being about making a system that works for everyone a long time ago. It's not explicitly socialist leaning or overtly capitalist either, I don't think that government bailing out huge businesses is something overtly capitalist especially when the systems we set up are pilfered in fraud during a global pandemic XD. People who needed that COVID relief for their businesses couldn't get jackshit sometimes and meanwhile criminals stole billions & billions of dollars from it.

 

Our system is like this because the narrative is extremist & so extremist that is has literally whittled away the concept of our money as something that will become devalued & at the same time there are no protections for those who are going to be boxed out of the economy while the government swoops in to save those who are deemed too big to fail. All in all though, it's important to remember that this time when we're fucked we're already so close to 0% rates and so terribly behind real inflation that the kind of shit that we're going to experience is going to make the peak of the 1970's look like nothing lol. So much more is going to bleed from tech than already has, it's going to be  historic.

Agreed. I think it's okay to keep calling the Fiscal Policy (as defined by Aster) Keynesian economics capitalistic, as it just puts more money into the hands of the rich and greedy that likely put their own business/livelihood on the line for the sake of more profit (See... 2008). Capitalism is forged through the brass of exploitation and greed, so you can keep calling it capitalism. 

 

Quote

also Keynesian*

All I could think about today while reading the OP at work, thank you. 

 

Edit: Also, this video was coincidentally uploaded the same day this post was made,

 

 

[Wawa]

I'd argue that if the Keynesian economical approach wasn't applied in the context of COVID, we'd potentially be in a worse-off situation than we are in right now; we'll never know for sure because the last pandemic predates Keynes.  The entire premise of Keynesian Economics is to stabilize the volatile nature of capitalism by focusing on aggregate demand to avoid crises like The Great Depression.  In our current situation, I wouldn't call it a 'backfire', but more like a failure due to State incompetence and corporate greed (both which are intertwined in US politics).

[All Ts]

@TheZZL @Wawa

 

It's much easier & simpler to say capitalism is to blame when it aligns with your views. Keynes philosophy was legitimately flawed and thought you could augment an economy to make it succeed. The idea that our economy needs our government to follow unemployment & inflation just to keep the foot on the gas pedal & try to never suffer any of the very real consequences has been subsidized by our predatory finance industry, slave labor overseas, military industrial complex/intelligence, and an overly inflated tech sector. China has been happy to sell us slave labor & it makes for cheap goods. The military is happy to apply our foothold. The finance industry in it's infinite wisdom is running the same simulation of overinvesting in tech & hoping it's deflationary enough to not be worth nothing.

 

Only now that rates are already so low and we've already lobbed so many nukes at the problems since the 70's people don't want to admit that there was never any real solution or remedy in introducing such huge pressures. The economy is like a heroin addict & no one wants to be the one in charge when it finally detoxes. It has become a game of hot potato to so fierce that other countries are involved & it is more than a little obvious how the economy has been run way too hot. There's nothing free market about introducing such huge pressures and it is a straight up fact that the US is a mixed economy. Why are we perpetuating such blatant falsehoods? 

[TheZZL]

@All Ts 

 

Yes, our economic system is flawed because it requires us to intervene in order to save the lives and wellbeing of our citizens. I don't think you'll find an economic system that would ever work perfectly, because if it's happening on Earth greedy humans will find a way to abuse it. I heard a quote recently I quite like, "There's two ways to progress, either by stepping over one another or helping each other up" - Something like that, said by someone, in some time before today.

[Aster]

@All TsIt seems like you're just going on a tangent about the U.S. economy in general. Would you by chance, make your points more specific? 

 

 

On 7/25/2022 at 10:44 PM, All Ts said:

The government has also been recklessly spending across the board, both sides are guilty of it.

Example.

 

Allocation I agree with, but what specificaly in spending?

 

On 7/25/2022 at 10:44 PM, All Ts said:

Whether it's a tax cut without proportional budget cuts or a huge program. The idea that the US economy will off ramp & we'll all be wicked educated with our tons of student debt, low interest rate houses where you rent out to a tenant (free money dude!1!!!1!), and all of this shit we've been "investing" in has been worth it is such a pipe dream.

Non Sequitur.

 

On 7/25/2022 at 10:44 PM, All Ts said:

I don't think that government bailing out huge businesses is something overtly capitalist especially when the systems we set up are pilfered in fraud during a global pandemic XD.

Non sequitur, but, I believe this correlates with our inflation rate to a degree; our government did have to print a set amount money to bail out these corporations.

 

On 7/25/2022 at 10:44 PM, All Ts said:

Our system is like this because the narrative is extremist & so extremist that is has literally whittled away the concept of our money as something that will become devalued & at the same time there are no protections for those who are going to be boxed out of the economy while the government swoops in to save those who are deemed too big to fail.

Baseless and subjective. Give an example for this to have any grounds.

 

On 7/25/2022 at 10:44 PM, All Ts said:

All in all though, it's important to remember that this time when we're fucked we're already so close to 0% rates and so terribly behind real inflation that the kind of shit that we're going to experience is going to make the peak of the 1970's look like nothing lol. So much more is going to bleed from tech than already has, it's going to be  historic.

I predict we're going to have a recession, not anything this extreme, however. Also, yes, the Federal Reserve has to keep up with inflation. If they do not, we are in deep worries.

 

On 7/25/2022 at 10:44 PM, All Ts said:

also Keynesian*

I do not know what you mean?
 

On 7/25/2022 at 10:44 PM, All Ts said:

They would have to increase rates************* quite a lot to dampen spending, especially when the measures of inflation are complete horseshit & the federal reserve does not take it's own standards seriously enough to act when they think inflation is transitory.

This has validity: the Federal Reserve has been under quite the impression that it has to raise intrest rates to great highs by the people. It has been criticized for not doing so. As stated before.

 

On 7/26/2022 at 1:36 AM, Wawa said:

I'd argue that if the Keynesian economical approach wasn't applied in the context of COVID, we'd potentially be in a worse-off situation than we are in right now; we'll never know for sure because the last pandemic predates Keynes.  The entire premise of Keynesian Economics is to stabilize the volatile nature of capitalism by focusing on aggregate demand to avoid crises like The Great Depression.  In our current situation, I wouldn't call it a 'backfire', but more like a failure due to State incompetence and corporate greed (both which are intertwined in US politics).

Completly agree with you. Although, I'm unclear if the goal of this economic practice was to keep Capitalism in check, or just to avoid recessions.

 

On 7/26/2022 at 12:35 AM, TheZZL said:

Agreed. I think it's okay to keep calling the Fiscal Policy (as defined by Aster) Keynesian economics capitalistic, as it just puts more money into the hands of the rich and greedy that likely put their own business/livelihood on the line for the sake of more profit (See... 2008).

The general population fixates on the taxing side of Fiscal Policy, not the government spending part. Thus, making it so the quota can go either which way. What I mean by this is that you can either increase taxes, or decrease them. You shouldn't necessitate that an increase in Fiscal Policy will accrue more income in the hands of the wealthy. Correct me if I misunderstood any technicalities. 

By the way, the wealthy aren't the only people who strive in the basis of greedienss. We are all greedy, that is a prerequisite for Capitilism. I favor our mixed economy system, however. Not fully Capitalist nor Socialist.

[Wawa]

6 hours ago, All Ts said:

@TheZZL @Wawa

 

It's much easier & simpler to say capitalism is to blame when it aligns with your views. Keynes philosophy was legitimately flawed and thought you could augment an economy to make it succeed. The idea that our economy needs our government to follow unemployment & inflation just to keep the foot on the gas pedal & try to never suffer any of the very real consequences has been subsidized by our predatory finance industry, slave labor overseas, military industrial complex/intelligence, and an overly inflated tech sector. China has been happy to sell us slave labor & it makes for cheap goods. The military is happy to apply our foothold. The finance industry in it's infinite wisdom is running the same simulation of overinvesting in tech & hoping it's deflationary enough to not be worth nothing.

I wouldn't say that the point of Keynesian economics is to make the economy succeed though, its purpose is more so to serve as guard rails to ensure it doesn't cause a depression as painful and severe as in the 1930s.  Business cycles are inherent in the system, so while Keynesian economics are far from perfect, they still serve as a tool to 'soften the blow' of the impact recessions have on the working class.  What you then begin to list off are symptoms of the capitalist system as it relates to the US, not Keynesian economics:  imperialism over developing countries via export finance capital and military force, slave labor in the global south due to said imperialism, selling arms via proxy wars, organizing coup d'etats in countries that directly challenge US global hegemony, and so on.  So yeah, it seems easy for me to blame capitalism when it comes to the US, but that's only after you do your homework on US history.  Even when it doesn't boil down to how a single country uses it, capitalism is a system based on exploitation, which would explain why it exacerbates any human tendencies of greed.

 

6 hours ago, All Ts said:

Only now that rates are already so low and we've already lobbed so many nukes at the problems since the 70's people don't want to admit that there was never any real solution or remedy in introducing such huge pressures. The economy is like a heroin addict & no one wants to be the one in charge when it finally detoxes. It has become a game of hot potato to so fierce that other countries are involved & it is more than a little obvious how the economy has been run way too hot. There's nothing free market about introducing such huge pressures and it is a straight up fact that the US is a mixed economy. Why are we perpetuating such blatant falsehoods? 

There's nothing free market about any country's economies--Laissez-Faire capitalism doesn't exist.  The free market is used in economics for the sole purpose of being a model, if it was to be the actual economic system of a sovereign country, I'd imagine that country's culture being 'survival of the fittest' on steroids.  There's nothing fundamentally problematic with government intervention in economics, what is problematic is how the government operates.  In the US, the government operates at the behest of corporations, or capital, as evidenced in how I interpreted your listing above, and how corporations are still enjoying record profits despite high inflation.  In a country like China, their government isn't held hostage to capital, so they are able to take decisive action in order to maintain low inflation rates despite COVID lockdowns.

 

To sum up, Keynesian economics has its flaws, especially when it comes to inflation, but the underlying issue is the system that it seeks to protect.  Peeling away that protection will only make matters worse, and I have yet to see a scientific argument that suggests otherwise.  To me, it feels like just a lot of side stepping because we in the West don't want to admit that a better alternative to our current economic system exists due to the exhausting amount of propaganda being spewed over decades.

[All Ts]

We cannot decide what inflation is important/real and what isn't, and when we finally take the pain of all of this blatant market manipulation people are going to see these policies for what they were. There are many even now among the Presidents camp who are going out telling people that we are not in a recession. So the inflation isn't real because we've fudged the numbers & forced them artificially low. The recession isn't real because we are going to change the definition of that too, how many quarters of negative growth until we're in a recession, maybe they make it 5?  Maybe we're just in an "age of transitory inflation" for the next decade? We are going to ignore the huge bubble in tech which is certainly not this deflationary and what happens when we need to save the economy this ONE LAST TIME when this finally all comes apart? What do we do then? We don't have anything. That is the problem. We don't have anyway to deal with this massive problem they've created, because the problem has been created by everything that they've tried to do to continuously ignore the consequences of an economy run completely manic. COVID did nothing but pop a bubble that has been building for 50 years.

 

How does this at end well for anyone? 

 

https://fred.stlouisfed.org/series/FEDFUNDS

https://fred.stlouisfed.org/series/M2SL

https://fred.stlouisfed.org/series/CSUSHPINSA

https://finance.yahoo.com/quote/AAPL/

https://www.usdebtclock.org/

 

I think we're in for much higher inflation than is currently happening and think people should find a job where you're as necessary as can be. The Central Banks and Politicians have everyone chasing their tails so much over who's a fat capitalist pig or a mean thieving communist. They're crashing on our global economy in a way that is completely reckless and is going to lower the quality life of everyone.