Why Keynesians are idiots and why artificially controlling interest rates leads to misallocation

[Hitta]

I think most Keynesians prefer fiscal policy vs monetary policy, but since the monetarist revolution this has become basically impossible. No western country uses fiscal policy to adjust the macroeconomy in the same way they use monetary policy (mainly because rich people hate being taxed or having their assets devalued). Keynes himself would not have responded in the way that most western states (especially the Anglo-saxon model countries) did.

The response to the crisis on both sides of the Atlantic was, as you described, crashing interest rates (and quantitative easing), which we basically can't do again without going into negative interest rates. The Euro's on a 0.000% interest rate. The Pound is down to 0.2500% (and this despite speculation it would drop to 0.1000%). US Dollar is 0.5000% but still some suspicion it will fall again. We don't have much reserves left, so monetary expansion is not something that can happen again, I think. Something is going to change, just a matter of when. Probably the response to the next economic crisis will be something that we've not seen before.

Now that being said, your post does not show that Keynesians are idiots, because the response to the crisis that you're talking about came almost all from Monetarists in the central banks using monetary policy, and neither does it show that artificially controlling rates causes misallocation. The Austrian business cycle theory has been quite vigorously opposed on empirical grounds that what Austrians described... didn't actually happen. I can't tell if your post is meant to be an explanation of ABCT or a challenge to debate it or what.

Well many state that the Austrians are wrong because we haven't had skyrocket inflation, but this only fits into a certain group of Austrian theorists. There is quite a bit of capital that is being sat on currently(a big chunk of it has been exported), but it'll start flowing into the system if they ever raised interest rates. They are pretty much setting up a stagflation scenario. When the unsustainable demand dies down, growth will fall.... prices will probably even fall a bit, but that won't last. Eventually the price drop will stop and even start to go up.. and we're going to have negative growth into inflation.

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Well many state that the Austrians are wrong because we haven't had skyrocket inflation, but this only fits into a certain group of Austrian theorists. There is quite a bit of capital that is being sat on currently(a big chunk of it has been exported), but it'll start flowing into the system if they ever raised interest rates. They are pretty much setting up a stagflation scenario. When the unsustainable demand dies down, growth will fall.... prices will probably even fall a bit, but that won't last. Eventually the price drop will stop and even start to go up.. and we're going to have negative growth into inflation.

The main thing about the Austrian Economists is that they aim for truisms over predictive accuracy in the moment. For example, they can tell you *if* a given system will collapse, but there is no way in hell they can give you an accurate date and time as to the occurrence of the collapse. Ludwig Von Mises himself refused to be the head of the Austrian Central Bank when offered the position because "A great crash is coming and I don't want my name anywhere near it." He *knew* it was all going to hell, but he was humble enough to know that there was no way for him to know exactly when it would happen but the odds were high enough that it could happen on his watch that he refused the very prestigious and powerful position of resident Head Central Banker.

The main problem with Austrian Economics (and I say this as an avowed Austrian Economist who really does think that Market>Government) is that its base ideology was formed during the dawn of the Industrial Revolution. The economists at the time never dreamed that "Capital" (i.e. the actual factories, computers, ect.) and labor (thank the internet for making "remote development" possible) would be absolutely mobile. For them, a "British" factory could be built anywhere from London to Dublin and anywhere within the borders of the UK, but there's no way in fucking hell it'd be built in Beijing. The workers available for the factory would likewise be necessarily the local "British" population". Just like there's no way a Toyota factory could ever be built in Detroit instead of Osaka and also employ Americans instead of Japanese people. Given the realities of the time these ideologies were developed, the cost of doing that shit would be so high as to make it utterly impossible on its face. Nowadays? Well, what are we seeing as the status quo? Yeah, that which I just said was supposed to be impossible. The old theories do not and cannot account for that. Thus, we need new ones and they are not in accordance with hardcore free market ideology.

I love freedom and all, but, well, I get how times change. Once gunpowder became a thing that meant the end of bows and swords. Guns are just plain better, ya gotta deal with it or die off. Absolute Free Markets are nice and all, but given human nature they just aren't optimal. They benefit the elite at the cost of sacrificing the common man who just wants to raise a family. That's the most victimized class of people in the world currently, yet ya never hear about it because that means you're an evil Patriarch if ya feel that way. And ya wonder why so many nice people are joining common cause with Neo-Nazi groups... Intolerance breeds intolerance y'know, if the left really wanted to make the world a better place they'd stop being so hardcore but I guess they just never learn from history. Just like damn near everyone else I talk to. God DAMN they are *so* fucking ignorant .

[rat200Turbo]

Well many state that the Austrians are wrong because we haven't had skyrocket inflation, but this only fits into a certain group of Austrian theorists. There is quite a bit of capital that is being sat on currently(a big chunk of it has been exported), but it'll start flowing into the system if they ever raised interest rates. They are pretty much setting up a stagflation scenario. When the unsustainable demand dies down, growth will fall.... prices will probably even fall a bit, but that won't last. Eventually the price drop will stop and even start to go up.. and we're going to have negative growth into inflation.

In my humble opinion the main purpose of keynesian policies are to temporarily satisfy the rebellious underclass through injecting stimulus, to respond to external threats, and to structurally adapt the economy to forces outside the market and capitalize on opportunities outside the market. The louisiana purchase is a good example of that. Often this means adapting the economy to changes in foreign policies and foreign markets. I do not think the keynesian principles were ever intended to manage a local economy. Nowdays the overprinting of money is, to some extent, a desperate effort to stimulate and satisfy the lower class who are moving toward revolution. Though there is massive corruption in government also, and these policies can be easily abused which is probably the main problem we're dealing with and why they have been so overused. China is also constantly abusing trade policies and manipulating their currency which could justify a good use of keynesian policies among other things. But realistically its probably, mostly, corruption which is responsible for our problems. Corruption or stupidity, maybe even both at the same time. Which is one more reason for people not to vote Clinton.

[Hitta]

In my humble opinion the main purpose of keynesian policies are to temporarily satisfy the rebellious underclass through injecting stimulus, to respond to external threats, and to structurally adapt the economy to forces outside the market and capitalize on opportunities outside the market. The louisiana purchase is a good example of that. Often this means adapting the economy to changes in foreign policies and foreign markets. I do not think the keynesian principles were ever intended to manage a local economy. Nowdays the overprinting of money is, to some extent, a desperate effort to stimulate and satisfy the lower class who are moving toward revolution. Though there is massive corruption in government also, and these policies can be easily abused which is probably the main problem we're dealing with and why they have been so overused. China is also constantly abusing trade policies and manipulating their currency which could justify a good use of keynesian policies among other things. But realistically its probably, mostly, corruption which is responsible for our problems. Corruption or stupidity, maybe even both at the same time. Which is one more reason for people not to vote Clinton.

Eh, Keynes definitely intended government spending to be used as a supplier of aggregate demand as he really believed in his Keynesian multiplier(which is beyond ridiculous). He thought governments could spend their way to high gdp and employment numbers.